Download JNTUH (Jawaharlal Nehru Technological University Hyderabad) MBA (Master of Business Administration) 4th Semester (Fourth Semester) R15 2018 Jan 724AG International Financial Management Previous Question Paper
Code No: 724AG
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA IV Semester Examinations, January-2018
INTERNATIONAL FINANCIAL MANAGEMENT
Time: 3hours Max.Marks:75
Note: This question paper contains two parts A and B.
Part A is compulsory which carries 25 marks. Answer all questions in Part A.
Part B consists of 5 Units. Answer any one full question from each unit. Each question
carries 10 marks and may have a, b, c as sub questions.
PART - A 5 ? 5 marks = 25
1. Give brief answer to the following:
a) International financial management Vs domestic financial management. [5]
b) Bretton Woods System. [5]
c) Participants in the foreign exchange market. [5]
d) Interest Rate Parity [5]
e) Foreign Direct Investment. [5]
PART ? B 5 ? 10 Marks = 50
2. What are ?Multinational Corporations? (MNCs) and what economic roles do they play?
[10]
OR
3. Define and explain the theory of comparative advantage. [10]
4. Proton, Inc. is a U.S.-based multinational manufacturing firm, with wholly owned
subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the
United States. Proton is traded on the NADSAQ. Luzon currently has 650,000 shares
outstanding. The basic operating characteristics of the various business units are as
follows:
US Parent Brazilian German Chinese
Company Subsidiary Subsidiary Subsidiary
Business Performance (000s) (US$) (reals, R$) (euros, ?) (yuan, Y)
Earnings before taxes, EBT (local
currency) 4,500.00 6,250.00 4,500.00 2,500.00
Tax rate 35% 25% 40% 30%
Avg exchange rate for the period
(per USD) ------ 1.8000 0.7018 7.7500
Required:
a) Determine the Net Profit from each unit in local currency
b) Determine the Consolidated Net Profit for the Parent in USD
c) Determine the EPS in USD. [10]
OR
5. Explain the structure and importance of Balance of Payments statement. [10]
R15
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Code No: 724AG
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA IV Semester Examinations, January-2018
INTERNATIONAL FINANCIAL MANAGEMENT
Time: 3hours Max.Marks:75
Note: This question paper contains two parts A and B.
Part A is compulsory which carries 25 marks. Answer all questions in Part A.
Part B consists of 5 Units. Answer any one full question from each unit. Each question
carries 10 marks and may have a, b, c as sub questions.
PART - A 5 ? 5 marks = 25
1. Give brief answer to the following:
a) International financial management Vs domestic financial management. [5]
b) Bretton Woods System. [5]
c) Participants in the foreign exchange market. [5]
d) Interest Rate Parity [5]
e) Foreign Direct Investment. [5]
PART ? B 5 ? 10 Marks = 50
2. What are ?Multinational Corporations? (MNCs) and what economic roles do they play?
[10]
OR
3. Define and explain the theory of comparative advantage. [10]
4. Proton, Inc. is a U.S.-based multinational manufacturing firm, with wholly owned
subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the
United States. Proton is traded on the NADSAQ. Luzon currently has 650,000 shares
outstanding. The basic operating characteristics of the various business units are as
follows:
US Parent Brazilian German Chinese
Company Subsidiary Subsidiary Subsidiary
Business Performance (000s) (US$) (reals, R$) (euros, ?) (yuan, Y)
Earnings before taxes, EBT (local
currency) 4,500.00 6,250.00 4,500.00 2,500.00
Tax rate 35% 25% 40% 30%
Avg exchange rate for the period
(per USD) ------ 1.8000 0.7018 7.7500
Required:
a) Determine the Net Profit from each unit in local currency
b) Determine the Consolidated Net Profit for the Parent in USD
c) Determine the EPS in USD. [10]
OR
5. Explain the structure and importance of Balance of Payments statement. [10]
R15
6.a) Suppose the United States and Great Britain are on the gold standard and the price of
gold in the U.S. is fixed at $1322 per ounce and the price of gold in Britain is fixed at
?975. What exchange rate must prevail between the dollar and the pound?
b) In Brussels, one can buy a U.S. dollar for ?0.8200. In New York, one can buy a euro for
$1.22. What is the foreign exchange rate between the dollar and the euro?
c) In December 1994 the government of Mexico officially changed the value of the
Mexican peso from 3.2 pesos per dollar to 5.5 pesos per dollar. What was the percentage
change in its value? Was this a depreciation, devaluation, appreciation, or revaluation?
Explain.
d) The spot rate for Mexican pesos is Ps10.74/$. If your company buys Ps350, 000 spot
from your bank on Monday, how much must your company pay and on what date?
[10]
OR
7. Explain the use of Currency Futures and Currency Options in exchange rate risk
management. [10]
8. Bright Research Institute of USA sold a super computer to the Shine Pharma in Germany
on credit and invoiced ?10 million payable in six months. Currently, the six-month
forward exchange rate is $1.10/? and the foreign exchange advisor for Bright Research
predicts that the spot rate is likely to be $1.05/? in six months.
a) What is the expected gain/loss from the forward hedging?
b) If you were the financial manager of Bright Research, would you recommend hedging
this euro receivable? Why or why not?
c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same
as the forward exchange rate quoted today. Would you recommend hedging in this case?
Why or why not?
d) If Bright Research sells forward ?5 million at the given forward rate and the balance is
sold at the expected spot rate of $1.05/ ?, what will be the total USD value of the
receivable? [10]
OR
9. Explain various parity theories that are helpful in determining the exchange rate. [10]
10. Discuss the steps involved in capital budgeting decision for a Multinational Company.
[10]
OR
11. A multinational firm can use Bilateral Netting and Multilateral Netting to effectively
manage its foreign currency cash flows. Explain with suitable examples. [10]
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This post was last modified on 23 October 2020