Reference no: EM1345518
The artificially low value of the Yuan makes US manufactured exports unattractively priced in China. And the undervalued Yuan leads to excessive US imports of Chinese made goods, which in turn, leads to an unwelcome trade balance in China's favor. For example, the trade deficit with China was roughly $20 billion for the month of May, 2007. The total trade deficit for the US for 2008 was roughly $700 billion. These numbers shrunk during 2009 as recession hit the global economy. But now they are growing again. In the month of May, 2010 the trade balance was -222 billion and for all of 2010 roughly -273 billion.
China chose to change their 'floating' arrangement and pegged the Yuan to the USD at a rate they selected. The US continued to complain so China recently allowed the Yuan to 'float' again. China holds such a large investment in US Treasuries as a result of the continuing US trade surpluses that the US does not have a great deal of leverage. If China sold those Treasuries the US dollar would fall significantly in value.
Please write a report for the financial managers of Yum!Brands and Wal-Mart by responding to following tasks:
1) Assume China suddenly decided to change its mind. Overnight, instead of increasing its value China decided to devalue downwards the Yuan by 20% in order to increase the attractiveness of its exports.
What would be the impact of the devalue of Yuan on the two US companies: i) Yum!Brands - whose 2010 profits were $1.16 billion coming from their Chinese operations and ii) Wal-Mart - where the great majority of the products sold in its US stores are made in China.
2) Based on your analysis, how big the risk is for Yum!Brands and Wal-Mart? How can both companies protect themselves from such a major change in currency values? What are your recommendations to these companies?
|
Illustrate what is the firm total revenue
: If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output. Illustrate what is the firm's Total Revenue.
|
|
Challenges and difficulties of applying software metrics
: How to execute software measurement? Write dwon challenges and difficulties of applying software metrics?
|
|
Sketch the path of the america on a coordinate system
: A galvanometer whose full scale current is 150amps and coal resistance is 75ohms is used with a 1.50 ohms shunt resistor to make an ammeter. what is the largest current that can be measured by the ammeter.
|
|
Define generally accepted accounting principles or standards
: If you had to describe or define generally accepted accounting principles or standards, what essential characteristics would you include in your explanation?
|
|
Managing exchange rate risk
: Assume China suddenly decided to change its mind. Overnight, instead of increasing its value China decided to devalue downwards the Yuan by 20% in order to increase the attractiveness of its exports.
|
|
Is my teams enthusiasm part of the problem
: What do you do? Was Joe's comment symptomatic of a larger problem within his group and was he simply exhausted from a tight deadline? Is my team's enthusiasm part of the problem? Or is this one of those squeaky wheel problems?
|
|
Find out the equivalent resistance outside the battery
: Fairgoers ride a Ferris wheel with a radius of 4.35m, the bottom of which is 1.75m from the ground. The wheel completes one revolution every 30s. A passenger drops his keys when he is three quarters of the way up and at the 10 o'clock position. Wh..
|
|
Increasing the stock variance
: The standard deviation of the market index portfolio is 20 percent. Stock A has a beta 1.5 and residual standard deviation of 30 percent.
|
|
Evaluate the cause and continue producing way
: Stop production and get the process right and investigate the chart construction because values cannot fall below the lower control limit on a range chart
|