Merton Electronics Corporation Case Essay

563 words - 3 pages

Question 1

Transaction Exposure is the risk faced by companies involved in global or international trade as a result of fluctuations in the currency exchange rate. This risk is relevant for situations when a company has entered a financial obligation. The methods to reduce transaction exposure are:
1. Transfer the exposure to another company. This can be done through quoting the sales price of your product in your domestic currency. For example if a Canadian firm sells to a Pakistani firm, the Canadian firm can reduce transaction exposure by quoting the price of its products in CAD dollars instead of Rupees.

2. Demand immediate payment. This is done by quoting the sales price in the foreign currency but demanding payment at time of sale in order to reduce any fluctuations due to passage of time.

3. Hedge.

Economic exposure is the extent to which a company is affected by to unexpected fluctuations in exchange rates. This exposure only considers unexpected fluctuations, as expected fluctuations would have already been discounted and reflected in the value of the firm.
Translation exposure is the extent to which a company’s consolidated financial statements are affected by changes in exchange rates, with the assumption that a company has subsidiaries in foreign jurisdictions that transact in a different currency.
Question 2
Forward-Contract hedge
Calculation:$3,000,000 * 0.7968 = $2,390,400 USD
Forward Contract hedges are the riskiest hedging instrument because there is considerable uncertainty with regards to the future sport rate. This results in high volatility and a wide range of outcomes.
Futures- Contract Hedge
Calculation: $3,000,000 * 0.8031 = $2,409,300 USD
Futures contracts are less risky than forwards for two mains reasons: 1) they trade on an organized exchange and therefore have a liquid market, and 2) the mark-to-market feature...

Find Another Essay On Merton Electronics Corporation Case

Problem Solution: Lester Electronics Essay

5324 words - 21 pages Lester electronics. Now, the CEO of Shang-wa is wishing to retire and has no formal succession plans for the company's management. At the same time, Shang-wa is being pursued for a takeover by Transnational Electronics Corporation (TEC). Lester Electronics and Shang-wa Electronics are both upset over the take over possibility. Lester is set to lose 43% of their revenues if they lose Shang-wa as a supplier. Lester Electronics is also being

Lester Electronic-Problem Solution Essay

5205 words - 21 pages capacitors are well known in the U.S. market that is why Transnational Electronics Corporation, a large manufacturer and distributor of electronics components wants to acquire Shang-wa. On the other hand, Avral Electronics equipment and component parts manufacturer headquartered in Paris wants to acquire Lester, because they want to market their product in the U.S. market (UOP, 2007).What is Financial Planning?Financial planning is the method in

Financial Analysis of Alternatives to Different Companies

4433 words - 18 pages and also directly involved the US security department.Regardless of the nature of the merger, before security can protect the new entity such as in the case scenario, it has to understand the component parts. If security is involved in the due diligence that may give Lester Electronics a head start on the process. In either case, however, a security survey of combined assets will be required as a first step in devising security for the joined

Business-to-Business Markets

1442 words - 6 pages case any problems arise (Clow & Lascu, 2012). Specific licensed manufacturers of Microsoft’s hardware include the following: Acrox Technologies Co., Ltd.; Areson Technology Corporation; Behavior Tech Corporation; CAN Technology; Chicony Electronics Company; Darfon Electronics Corporation; Dexin Corporation; Dynapoint Spec-research,Inc; Ione Technology, Inc; Intech Electronics; i-rocks Technology; Key Mouse Electronic Enterprise Company, Ltd.; KYE

Samsung Business Case Study Complete Analysis

4140 words - 17 pages better payment conditions (thus improving working capital requirement). As the chaebol is also identified by one strong name (as it is the case for Samsung, with Samsung Electronics, Samsung Corning and Samsung Networks for instance), companies can capitalize on their chaebol's name and reputation. Chaebols have indeed relied on decades of history in their home market. Besides operational benefits, the chaebol also facilitates access to

The Value of the Tax Shield of Debt

2594 words - 10 pages it is a small business or a global corporation, has always been an important issue for the management. The capital structure refers to how the assets of the firm are financed. For small businesses the possibilities may include the owners’ equity, some amount of money that is due for payment to suppliers or loans from the bank. In case of multinational corporations, possibilities vary from short- and long-term bonds, stock market and loans in

Gap Analysis: Lester Electronics

3252 words - 13 pages years.This agreement works well for both companies until recently when an offer was made by a competitor called Transnational Electronics Corporation interested in acquiring LEI. Due to growing demand Shang-Wa realizes more work is required although Mr. Lin is reaching his peak and prepares for retirement. In order to walk away from his company; Mr. Lin wants to ensure LEI is able to purchase this company and continue the growth opportunities currently

Cooper v Hobart [2001] 3 S.C.R. 537 - Carleton University - Case Brief

3181 words - 13 pages . [1: Mortgage Brokers Act, RSBC 1996, c 313] [2: Cooper v. Hobart, 2001 SCC 79, [2001] 3 SCR 537] In the case, Cooper v Hobart [2001] 3 S.C.R, Eron Mortgage Corporation which was a mortgage broker under the Mortgage Brokers Act, had suspended a registered mortgage license because the investor's funds were used for unauthorized purposes. The plaintiff applied to have the action certified as a class action proceeding under the Class Proceedings

Market Analysis for LG Group

2608 words - 10 pages global leaders and technology innovators in consumer electronics, mobile communications and home appliances in the world. The main arm of the group is LG Electronics. Established in 1958, quickly became a global force in converging technology products in electronics, information and communication, designed to meet the needs of different customers and improve their lives. As a worldwide corporation, LGE's operates under the product concept of

MBA/540 – Maximizing Shareholder Wealth

1934 words - 8 pages Transnational Electronics Corporation interested in acquiring LEI. Due to growing demand Shang-Wa realizes more work is required although Mr. Lin is reaching his peak and prepares for retirement. In order to walk away from his company; Mr. Lin wants to ensure LEI is able to purchase this company and continue the growth opportunities currently in place.LEI has decided to merge with Shang-Wa, as a stable and profitable company this merger will

Supreme Canning Company

997 words - 4 pages Exporting and the network model 51 51 52 55 61 70 73 iv CONTENTS 2.7 Ethical/moral issues 76 2.8 Social responsibility and the business environment 80 Summary 87 Questions for discussion 87 References 88 Further reading 90 Case Study 2.1 Bridgestone Corporation 91 Case Study 2.2 GlaxoSmithKline PLC 94 3 The international environment 99 3.1 Introduction 99 3.2 Economic forces 100 3.3 Socio-cultural environment 106 3.4 Political/legal environment 118

Similar Essays

Criminology Essay

846 words - 4 pages for many years, grew up with many friends and is remembered as the guy who was always smiling. But for almost 30 years, Earl Jones was living the life of a conman (Canadian Broadcasting Corporation, 2011). In his early twenties Jones began working in the financial field dealing with estate planning and handling wills. In his late thirties, Jones, without registering as a financial advisor, managed to open his own investment advising business

Gap Analysis: Lester Electronics

2347 words - 9 pages strategy that includes Lester Electronics' own growth strategy, as well as that of Shang-wa. The company will need to formulate a successful financial plan that will optimize the growth opportunities and maximize the shareholders' wealth.Situation AnalysisIssue and Opportunity IdentificationSome of the issues that involve the merger that Lester Electronics will need to face include Transnational Electronics Corporation (TEC) has approached Shang-wa

The Wallace Group Strategic Management

1558 words - 6 pages THE WALLACE GROUP, INC. THE WALLACE GROUP, INC. I. CASE ABSTRACT Harold Wallace, founder, serves as Chairman and President of the Wallace Group. He owns 45% of the outstanding stock. The company consists of three operating groups -- Electronics, Plastics, and Chemicals -- which generate sales of $70 million. Mr. Wallace continues direct operational control over the Electronics Group. Several years ago, Wallace and the Board embarked on a

Strategic Analysis

1568 words - 7 pages performance and by identifying the right innovation technology also one of the business strategy to ensure openness and user engagement in market. In the case of Sony Corporation, they implemented a few series of restructuring process within the organisation to ensure long term growth by focusing on high demand products, strategic business units and focus on product development aligns with current technology. These factors has forced Sony Corporation to