Blades plc parity relations in international
In the short run, Blades would like to import from Thailand because inputs such as rubber and plastic are cheaper in Thailand.
Blades inc case study answers chapter 7
Assumptions: If other central banks dont make same adjustments at same time. Furthermore, since Blades is considering longer range plans in Thailand, importing from and exporting to Thailand may present it with an opportunity to establish initial relationships with some Thai suppliers. How could competition from firms in Thailand and from U. ANSWER: If the net baht-denominated cash flows are converted into dollars today, Blades is not subject to any future depreciation of the baht that would result in less dollar cash flows. Since the baht has become a freely floating currency, the currency should be expected to depreciate due to the high inflation levels prevailing in Thailand. However, it states that the rate of change in the prices of products should be similar. Why or why not? One point of concern for you is that there is a tradeoff between higher interest rates in Thailand and the delayed conversion of Baht into dollars. As far as exporting is concerned, Blades, Inc. Blades Revenue will decrease due to fixed price and quantity of Speedos.
For example, the dollar cost of imported inputs may become more expensive over time if the baht appreciates even if Thai suppliers do not adjust their prices. If, however, Blades can borrow funds at an interest rate above 8 percent as is currently the case with an interest rate of 10 percentBlades should use the excess funds generated in Thailand to support its operations rather than borrowing.
Considering that Blades is contemplating to eventually shift its sales to Thailand, this could be a major competitive advantage. A decline in currency value is often referred to as depreciation.
Since Blades is under a three-year export arrangement with Entertainment Products, Inc. Determine whether the forward rate is priced appropriately. In the long run, the goal is to possibly establish a subsidiary in Thailand and to be one of the first roller blade manufacturers in Thailand.
Blades inc case study answers chapter 1
Blades revenue generated in Thailand will be negatively affected by PPP. Nevertheless, the importer may not offer to renew this arrangement in excess of the original three years if the Thai economy does not improve. An exchange rate measures the value of one currency in units of another currency. How Thai Central Bank Can reduce outflow of funds using interest rates? One possible alternative is to investigate, via regression analysis, whether PPP holds between the U. Also, it would like to export to Thailand to take advantage of the fact that few roller blades are currently sold in Thailand. If they are not appropriate, determine the profit you could generate by withdrawing? If the net Baht received from the Thailand operations are invested in Thailand, how will US operations be affected? This is an especially important point since Thai managers may conform to goals other than the maximization of shareholder wealth. Nevertheless, the importer may not offer to renew this arrangement in excess of the original three years if the Thai economy does not improve. What is the relationship between the exchange rates and relative inflation levels of the two countries? This is an especially important point since Thai managers may conform to goals other than the maximization of shareholder wealth. A printout of the presentation slides should be uploaded on Its Learning and made available to me at the start by ALL teams. Furthermore, since Blades is considering longer range plans in Thailand, importing from and exporting to Thailand may present it with an opportunity to establish initial relationships with some Thai suppliers. Conversely, Blades cost of goods sold incurred in Thailand is relatively small.
Both of these factors suggest that the imperfect markets theory applies to Blades in the short run.
based on 83 review