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Decko Corporation is a United State firm with a Chinese subsidiary that produces cell phones in China and sells them in Japan. This subsidiary pays its wages and its rent in Chinese yuan, which is stable relative to the dollar. The cell phones sold to Japan are denominated in Japanese yen. Assume that Decko Co. expects that the Chinese yuan will continue to stay stable against the dollar. The subsidiary's main goal is to generate profits for itself and reinvest the profits. It does not plan to remit any funds to the US parent.
a) Assume that the Japanese yen strengthens against the US dollar over time. How would this be expected to affect the profits earned by the Chinese subsidiary.b) If Decko Co. had established its subsidiary in Tokyo, Japan, instead of China, would its subsidiary's profits be more exposed or less exposed to exchange rate risk?c) Why do you think that Decko Co. established the subsidiary in China instead of Japan? Assume no major country risk barriers.d) If the Chinese subsidiary needs to borrow money to finance its expansion and wants to reduce its exchange rate risk, should it borrow US dollars, Chinese yuan, or Japanese yen?
Information covering the most recent thirty days are given in the following table for the value per gallon of regular gasoline at a local station.
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Using demand and supply analysis to assist you, determine the effects on the exchange rate between the British pound and the Japanese yen from:
When the Euro was 1st issued it hit the market at $1.17/€ on 1 Jan 2001. Calculate the Euro price of the dollar when the Euro debuted?
Questions based on International Business
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