Suppose Awesome Bar & Grill Inc. is a sports bar located in Canada that will buy 1000 kegs of beer, at 3,500 pesos per keg, from a supplier in Mexico every month for the next 10 years so it can sell beer at it's Monday Night Football events in Vancouver. Awesome Bar & Grill Inc. sells the beer to its customers in Canadian Dollars but pays for the beer from its supplier in Mexican Pesos; Awesome Bar & Grill Inc. therefore exposes itself to currency risk. What kind of financial instrument would best fit Awesome's risk management needs? Select one item from the list below Group of answer choices foreign currency swap barley future stock option D&O insurance.
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Suppose Awesome Bar & Grill Inc. is a sports bar located in Canada that will buy 1000 kegs of beer, at 3,500 pesos per keg, from a supplier in Mexico every month for the next 10 years so it can sell beer at it's Monday Night Football events in Vancouver. Awesome Bar & Grill Inc. sells the beer to its customers in Canadian Dollars but pays for the beer from its supplier in Mexican Pesos; Awesome Bar & Grill Inc. therefore exposes itself to currency risk. What kind of financial instrument would best fit Awesome's risk management needs?
Select one item from the list below
Group of answer choices
foreign currency swap
barley future
stock option
D&O insurance.
Step by step
Solved in 3 steps
- Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.1. Calculate the number of beers that Green Lantern should request in each order2. Calculate the annual number of orders3. Calculate the total annual ordering costB. Kopi Nguyen Bhd, resident company of Malaysia and is currently runs a franchise business with Vietnamese Coffee Plt. Due to greater demand of the coffee among Malaysian, the business is expanding and the following transactions are incurred during the basis year 2020: RM i Payment to Vietnamese Coffee Plt for the following: Cost of special coffee machines Installation costs for special coffee machines Supervision costs for the operation of the machines for two weeks 250,000 70,000 5,000 Royalty payment to Robert, non-resident for the design of the new outlet of Kopi Nguyen in Kuala Lumpur Payment of interest on the loan to finance the new outlet with CIMB Bank Bhd, a licensed bank in Malaysia iv. 11. 65,000 111. 12,000 Payment to Hyun Bin, a Korean artist during the launching of 100,000 the new outlet. Hyun Bin is an ambassador of the product. Rental of special espresso machine from La Coffee, an Italian V. 80,000 company. Required: Determine whether the withholding provision are…Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.1. Calculate the total annual carrying cost2. Determine the order-size decision Green Lantern should make if the Luanshya distributor offers a 5 % discount off the purchase cost excluding the delivery price for minimum orders of 1 824 beers.3. Assuming sales are uniform throughout the year (365 days) and the lead time is 9 days; determine the reorder point at the EOQ level.
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- ORANGE PRODUCTS INC. Orange Products Inc. is a producer of juice drinks in Florida, USA. Until now, the company has confined its operations and sales to the United States, but its CEO, Ray Jalkio wants to expand into the Pacific Rim. The first step is to set up sales subsidiaries in Japan and Australia. then to set a production plant in Japan, and finally to distribute the product throughout the Pacific Rim. The firm's CFO, Janet Jackson, is enthusiastic about the plan, but she is worried about the implications of the foreign expansion on the firm's financial management process. She has asked your group to develop a tutorial package that explains the basics of multinational financial management. The tutorial will be presented at the next management committee (ManCom) meeting. Consider the following exchange rates: US Dollar Required to buy one unit of Foreign Currency Number of units of Foreign Currency per US Dollar Japanese Yen Australian Dollar 0.0091 109.89 0.760 1.316Company Xorex is selling printers. They have 36 salespeople in Canada and 48 salespeople in the US. Their annual salary is $48K for each salesperson. Salespeople also receive a 2% commission fee for each printer they sell. Each US salesperson is selling 24 printers each month, but Canadians are selling only 15 printers per month. To improve the performance of Canadian salespeople, Xorex has decided to buy a new sales software; however, they need to train all Canadian salespeople before they start using this new software. Therefore, Xorex has decided to send 3 Canadian salespeople to the US for training each month, so all Canadian salespeople will have been trained in the US by the end of the year. They think that when all employees are trained, they can implement the new sales program and each salesperson can sell 21 printers in Canada each month. Xorex offers each Canadian employee a $4500 incentive to participate in this training program. It also pays for transportation and…Davao has a potential foreign customer that has offered to buy 1,500 tons at P450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity? Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500? If the sales volume is estimated to be 2,100 tons in the next year, and if the prices and costs stay at the same levels and amounts next year, the…
- Sexy Inc. makes use of the lockbox system, what would be the net benefit to the company? Use 365 days in a year. Question MTR bank has agreed to provide a lockbox system to Sexy Inc. for a fixed fee of P50, 000 per year and a rate of P.50 for each payment processed by the bank. On average, Sexy Inc. receives 50 payments per day, each averaging P20,000. With the lockbox system, the company’s collection float will decrease by two days. The annual interest rate on money market securities is 6%. If Sexy Inc. makes use of the lockbox system, what would be the net benefit to the company? Use 365 days in a year. A. P50,000 B. P59,125 C. P60,875 D. P120,000A company produces jackets for €20 each in Portugal, which has a corporate tax rate of 21%. It then transfers its products to its Irish subsidiary for resale to the Irish public at a sales price of €30 per jacket. The corporate tax rate in Ireland is 12.5%. Calculate the total after-tax profit in the two countries if the company uses a transfer price of €23 and it sells 10,000 jackets. ANSWERS: €84,950 €15,050 €66,500 €8,495 €8,750(b) RG Motors has been approached by a new customer with an offer to purchase 5,000 units of its hand-free, Wi-Fi-enabled automotive model – the SMART, at a price of RM18,000 per automobile. RG’s other sales would not be affected by this new customer offer. RG normally produces 100,000 units of its SMART model per year but only plans to produce and sell 90,000 units in the coming year. The normal sales price is RM35,000 per SMART. Unit cost information for the normal level of activity is as follows: [RG Motors telah didatangi oleh pelanggan baru dengan tawaran untuk membeli 5,000 unit bebas tangan, model automotif berkemampuan Wi-Fi – SMART, pada harga RM18,000 setiap automobil. Jualan lain RG tidak akan terkesan dengan tawaran pelanggan baru ini. RG kebiasaannya menghasilkan 100,000 unit model SMARTnya setiap tahun tetapi hanya merancang untuk menghasilkan dan menjual 90,000 unit pada tahun akan datang. Harga jualan normal adalah RM35,000 setiap SMART. Maklumat kos unit untuk tahap…