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B7530 Corporate and Global Finance Week 8.1

Assignment 2: Required Assignment 2—Analyzing Risk

 

In this assignment, you will write an executive summary analyzing the exchange risks, country risks, and political risks the company executive team needs to be aware of in building a manufacturing facility in Brazil. Your summary will also provide a recommendation of the location, the company should select for building a new manufacturing facility. In support of your recommendation, you will refer to the analysis performed and include all calculations.

In addition, for this assignment, using the information in your executive summary, you will create a PowerPoint presentation which will include your recommendation of where to build the new facility, the supporting analysis for your recommendation, and the risks involved in building a new facility in Brazil.

Scenario:

Your employer, GBATT, headquartered in the United States of America, has decided to expand operations into Brazil. Although the decision to expand has been made, the CFO has asked for an analysis of the risks associated with the expansion. Your instructions are to analyze specific risks associated with building a manufacturing facility in Brazil. Include a description of each of the following types of risks and analyze their impact on the decision to build the new facility.

Exchange risksCountry risksPolitical risks For the expansion, GBATT is exploring which of two possible approaches to take for constructing a new manufacturing facility in Brazil. In addition to analyzing the risks associated with the expansion, you have been asked to provide analysis for selecting the best approach for the new facility. The following is the information the CFO provided to you to assist in your analysis.



GBATT’s current capital structure is:

  • 60% equity and 40% debt.
  • Stockholders require 6% return on their investment.
  • Bondholders require a 3% return.
  • The corporate tax rate is 35%.
GBATT has narrowed the choice between two facilities in two different parts of the country. Preliminary analysis has been completed and an estimate of the future net cash flows for each choice has been provided. The original cash flows were provided in U.S. dollars. Dollars are in thousands.

Year

Choice A

Choice B

0

($15,000)          

(10,000)

1

2,000

1,500

2

5,000

4,000

3

6,000

5,000

4

6,000

5,000

5

4,000

3,000

After completing the risk analysis, use the information from the chart above to complete the following:

  1. Calculate GBATT’s WACC.
  2. Using the WACC and the above cash flows, calculate the NPV of each project.
  3. Justify the importance of knowing a company’s WACC and NPV.
  4. Recommend the facility to build based on the NPV.
  5. Use current exchange rates to convert the NPV’s to the Brazil real.

Note: Exchange rates can be found at Yahoo Finance and other Internet sites.

Write a 4–5-page paper in Word format. In addition, create a 7–9-slide PowerPoint presentation. Utilize at least six scholarly sources in your research. Make sure you write in a clear, concise, and organized manner; demonstrate ethical scholarship in accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation.

Apply APA standards to citation of sources.

Answer
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International Finance word doc and power point

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INTERNATIONAL xxxxxxxxxxxxxxx 3

International xxxxxxx

Name:

Instructor:

Date:

xxxx Analysis

xxxxxxxxx xxxxxxx

xxx xxxxxxxx xx expand the business operations across the xxxxxx is one xx the xxxxxxxxx approaches xxxxxxxx due xx the xxxxxxxxxxx it gives xx xxxxxxxxx xxxxxxxxxxxx xxx foreign country xxx the xxxxxxxxx of xxxxxxxx x xxxx xx xxxxxx xxx xxxxxxxxxxx costs xxxx labor and xxxxxxxx for xxx xxxxxxxxx xxx materials (Siddaiah, xxxxxx xxxxxxxx xxx penetration in the foreign market expands xxx potential xxxxxx xxxxxxxxx xxxxx xx critical in sales xxxxxxx maximization. xxxxxxxx xxx xxxxxxxx xxxxxx xx xxxxxxxx xxxxx evaluating the xxxxxxxxx risks like political, xxxxxxxx rate, xxx country’s xxxx xxxx x foreign xxxx xxx face (Siddaiah, 2010). xxxxxxxxxxxx xx analysis on the xxxxxxx xxxxx that GBATT xxxx xxx xxxx xx xxxxxxxx its operations in Brazil has xxxx xxxxxxxxxx

xxxx xxxxxxxxx risk xxxxxxxx entails assessing the possibility xx xxx xxxxxxxxx entering in x xxxxx foreign

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file2.pptx preview (798 words)

xxxxxxxxxxxxxxxxxxxxxxx

International xxxxxxx

Executive Summary

GBATT Company xx xxxxxxxxxxx to start x new operations in xxxxxxxxxxx xxxxxxxx xx based xx xxx xxxxxxxxx opportunities it xxx xxxxxxx xx xxxxxxxxx xxxxxxxx across xxx border. However, there is need xx xxxxxxxx the potential risks faced xx international xxxxxxxxxxxxxx xxx political xxxxx xxxxxxx risk, xxx xxxxxxxx xxxx xxxx xx expanding to xxxxxx xxxx xxxx xxxxxxxxxx

Political xxxx

xxxxxxxxx xxxx analysis entails assessing xxx xxxxxxxxxxx xx xxxx the capital xxxxxxxxxx xxx to the political xxxxxxx decisions, or xxxxxxxxxx prevailing xx emerging in that country (Sercu, 2011). The xxxxxx impeachment xx xxxxxxxxx xxxxxxxxx xx a political xxxxx xx xxxxxxxxxxxxx impeachment of xxx president xxx xxxxxxx xxx country xx xxxxxxxxx opinion, which xxx threatened xxx occurrence of civil protests and violence. xxx occurrence of xxx political protests xxxxx x threat xx the capital investment xx GBATT because of the operation

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