International Finance

1. As a principle of investment you should invest where the interest rates are high and currency appreciates. So according to this principle the company should invest its excessive funds in Thailand as the interest rates are high over there but this interest rate is high due to economic instability so it means if we take the benefit of increased interest rates we have to delay the investment for one year. If the company invests in USA it will get the money immediately but at a lower interest rate, and this is a tradeoff between the currency and the interest rates.

2. Revenue: 180,000*4,594 = THB 826,920,000

CGS: 72,000*2,871 = THB 206,712,000

Thus, Net Revenue from Thailand = THB 620,208,000

3. In Blades could borrow funds at an interest rate below 8 percent, it would be best to invest the excess money generated in Thailand at 8% and borrow the money at a lower rate. However, in this case, Blades can borrow funds at a 10% interest rate, which is higher than the 8, so they are better off using the excess money generated in Thailand to support its operations rather than borrowing as show below.

1)

62028000(1+0.15)^1 = THB 713239200,

713239200*0.022 = $15691262

2)

THB 620208000 * 0.024 = $14884992

14884992(1+0.08)^1 = $16075791

Therefore, plan 2) is higher than plan 1) by approximately $384,529. So, Ben Holt’s plan should not be implemented.

3. In Blades could borrow funds at an interest rate below 8 percent, it would be best to invest the excess money generated in Thailand at 8% and borrow the money at a lower rate. However, in this case, Blades can borrow funds at a 10% interest