Understanding of the financial and economic environment

Reference no: EM133607360 , Length: word count:1500

Managing Resources in the International Business Environment

Component: Individual Report

Learning Outcome 1: Make informed strategic choices based on an understanding of the financial and economic environment and of key institutions within it
Learning Outcome 2. Determine the likely impact of changes in financial and economic circumstances on organisations and industries with which they are associated

Thinking skills
Learning Outcome 3. Appraise the financial performance and standing of a business or business unit
Learning Outcome 4. Determine the likely impact of changes in financial and economic circumstances on organisations and industries with which they are associated

Subject-based practical skills
Learning Outcome 5. Critique and contribute to project appraisal decisions
Learning Outcome 6. Assess the appropriate means whereby international businesses can raise and manage financial resources

Skills for life and work (general skills)
Learning Outcome 7. Make informed contributions to policy debates within their industry or sector.
Learning Outcome 8. Communicate effectively on financial and economic matters to both expert and non-expert audiences

Task

You are International Business Manager at a UK based company. Your company has identified USA and Europeas potential markets and wish to expand asap and plans afull-scaleexpansion. You are requested to analyse both projects and advise.

In considering such large project, you mustwork out the risk of each project, cost of capital (Hint: you can use prevailing interest rates and inflation in each region to base your calculation) and calculate NPV. Allocate discount rate for each project according to current international business climate and justify why you allocated the discount rate for each region.Discuss how you aim to manage international risks.

Projected cash flows in respective currencies:

Year	Net Cash Flow - USA *USD*	Net Cash Flow -EuropeEUR
0	-20 million	-20 million
1	2 million	2 million
2	4 million	3 million
3	5 million	4 million
4	6 million	8 million
5	8 million	8 million

Task:

Question 1: Briefly discuss viability of both projects in today's global business context. Based on your discussion allocate and justify discount rate for both projects.

Question 2: How much investment (GBP)is needed for each project and what is the NPV of each project? Use spot and forward exchange rates to discuss.

Question 3: Considering current world economic climate, the future exchange rates are uncertain. How would you analyse/anticipate the change in exchange rates? Write a brief proposal to mitigate impact of possible exchange rate fluctuations

Question 4: Discuss your calculations and advise which project should be selected.

General Presentation
The report must be word processed, double spaced with 25mm margins. The font size must be such that the project is easily readable e.g. a font size of either 12 or 14 point (excluding headings). Use widely-used fonts such as Times New Roman, not those that might be considered informal or unusual. Pages must be sequentially numbered.

Chapters, sections and sub-sections must be clearly identified and sequentially numbered or lettered, with separate chapters beginning on a new page.

Diagrams, graphs, figures, tables, pictures and charts must be incorporated into the report and they should be clearly labelled and referenced.

References must be accurately provided in the text using the Harvard System (see Saunders et al., 2009).

Referencing.
The university expects students to use Harvard referencing as specified in the book ‘Cite Them Right'.

Reference no: EM133607360

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