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1SolutionsforInternationalCorporateFinanceChapter1...........................................................................................................................................2Chapter2...........................................................................................................................................4Chapter3...........................................................................................................................................6Chapter4...........................................................................................................................................8Chapter5.........................................................................................................................................12Chapter6.........................................................................................................................................14Chapter7.........................................................................................................................................16Chapter8.........................................................................................................................................18Chapter9.........................................................................................................................................21Chapter10.......................................................................................................................................23Chapter11.......................................................................................................................................26Chapter12.......................................................................................................................................292Chapter15.InternationalBusinessMethods.SnyderGolfCo.,aU.S.firmthatsellshigh-qualitygolfclubsintheU.S.,wantstoexpandinternationallybysellingthesamegolfclubsinBrazil.a.Describethetradeoffsthatareinvolvedforeachmethod(suchasexporting,directforeigninvestment,etc.)thatSnydercouldusetoachieveitsgoal.ANSWER:Snydercanexporttheclubs,butthetransportationexpensesmaybehigh.IfcouldestablishasubsidiaryinBraziltoproduceandselltheclubs,butthismayrequirealargeinvestmentoffunds.Itcoulduselicensing,inwhichitspecifiestoaBrazilianfirmhowtoproducetheclubs.Inthisway,itdoesnothavetoestablishitsownsubsidiarythere.b.Whichmethodwouldyourecommendforthisfirm?Justifyyourrecommendation.ANSWER:IftheamountofgolfclubstobesoldinBrazilissmall,itmaydecidetoexport.However,iftheexpectedsaleslevelishigh,itmaybenefitfromlicensing.Ifitisconfidentthattheexpectedsaleslevelwillremainhigh,itmaybewillingtoestablishasubsidiary.ThewagesarelowerinBrazil,andthelargeinvestmentneededtoestablishasubsidiarymaybeworthwhile.8.ComparativeAdvantage.a.Explainhowthetheoryofcomparativeadvantagerelatestotheneedforinternationalbusiness.ANSWER:Thetheoryofcomparativeadvantageimpliesthatcountriesshouldspecializeinproduction,therebyrelyingonothercountriesforsomeproducts.Consequently,thereisaneedforinternationalbusiness.b.ExplainhowtheproductcycletheoryrelatestothegrowthofanMNC.ANSWER:Theproductcycletheorysuggeststhatatsomepointintime,thefirmwillattempttocapitalizeonitsperceivedadvantagesinmarketsotherthanwhereitwasinitiallyestablished.10.ValuationofWal-Mart’sInternationalBusiness.InadditiontoallofitsstoresintheU.S.,Wal-Marthas11storesinArgentina,24storesinBrazil,214storesinCanada,29storesinChina,92storesinGermany,15storesinSouthKorea,611storesinMexico,and261storesintheU.K.ConsiderthevalueofWal-Martasbeingcomposedoftwoparts,aU.S.part(duetobusinessintheU.S.)andanon-U.S.part(duetobusinessinothercountries).Explainhowtodeterminethepresentvalue(indollars)ofthenon-U.S.partassumingthatyouhadaccesstoallthedetailsofWal-MartbusinessesoutsidetheU.S.ANSWER:Thenon-U.S.partcanbemeasuredasthepresentvalueoffuturedollarcashflowsresultingfromthenon-U.S.businesses.Basedonrecentearningsdataforeachstoreandapplyinganexpectedgrowthrate,youcanestimatetheremittedearningsthatwillcomefromeachcountryineachyearinthefuture.Youcanconvertthosecashflowstodollarsusingaforecastedexchangerateperyear.Determinethepresentvalueofcashflowsofallstoreswithinonecountry.Thenrepeattheprocessforothercountries.Thenaddupallthepresentvaluesthatyouestimatedtoderiveaconsolidatedpresentvalueofallnon-U.S.subsidiaries.315.InternationalJointVenture.Anheuser-Busch,theproducerofBudweiserandotherbeers,hasrecentlyexpandedintoJapanbyengaginginajointventurewithKirinBrewery,thelargestbreweryinJapan.ThejointventureenablesAnheuser-BuschtohaveitsbeerdistributedthroughKirin’sdistributionchannelsinJapan.Inaddition,itcanutilizeKirin’sfacilitiestoproducebeerthatwillbesoldlocally.Inreturn,Anheuser-BuschprovidesinformationabouttheAmericanbeermarkettoKirin.a.ExplainhowthejointventurecanenableAnheuser-Buschtoachieveitsobjectiveofmaximizingshareholderwealth.ANSWER:ThejointventurecreatesawayforAnheuser-BuschtodistributeBudweiserthroughoutJapan.ItenablesAnheuser-Buschtopenetrat