Polish national

A Polish national with extensive knowledge of Polish culture

As a minority partner in Wasniowska, a Polish national with extensive knowledge of Polish culture, we, William Paterson and Associates, a US MNE, invest $10 million in a furniture plant in Poland. Here is the information that we currently have: Up to 60% of the investment’s cost and 40% of the interest are subsidized by the European Union. As a result, we obtained $60 million in free money from the EU while borrowing $30 million. In the subsequent ten years, the principle and interest payments have to be amortized. According to projections for the project’s profitability, the first 10 years will see revenue of $20 million per year, cost of goods sold of $3.5 million, SGA expenditures of $9 million, interest expense of $1.8 million per year, and a tax rate of 20%. The bond rate for wp01/Wasniowska is 11%, the Polish T bond rate is 6%, this company’s bheta is 2.5, and the ROR for the Polish stock market has been 12% annually. The NCF and costs will continue to increase indefinitely at a 4% growth rate after the first ten years.
Additionally, during the 10-year research, the Polish zloty has shown weakening versus the US dollar, the euro, and all other currencies, and it is anticipated that this trend will continue. Additionally, the market for this factory is furniture, and the price elasticity of demand for that market is 6 (important given the weak value of the zloty in comparison to other currencies). Demand is also quite responsive to income, with an average of approximately 5. The outlook for the markets served by this factory is one of rising incomes.
a. Calculate the Wasniowska/wp01 NCF, COC, and NPV. Twenty points
b. Explain this FDI from the perspective of behavior. Five points
B. The British pound and the Australian dollar have inflation rates of 2% and 8%, respectively. When the spot ER is BP/A$.1, what should the sex/forward ER be? Tell us about the idea of purchasing power. Ten points (Single page)

C. There are 2% and 5% interest rates for the dollar and the euro, respectively. What will the anticipated spot rate be if the IFE applies if the spot exchange rate is $ 1/EUR 1? What does IFE stand for? Is it associated with PPP? (Single page)

D. We are aware that the exchange rate between the yen and the Swiss franc is 100 yen per SF1, which means that in the spot ER market, one Swiss franc equals 100 yen. In the forward market, 1 Swiss franc buys 80 yen at the 1-year forward rate of 80 JPY/swiss franc. What should the yen rate be for IPT (interest parity theory) to succeed if the Swiss franc has a 0.02 interest rate? Will there be balance if the yen rate is 6%? What would happen in that case? Display both sums and differences. Show everything in both French and English terms as well. (one page, 25 points)

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Essays (30 points) (each on a separate page)

A. Discuss exchange rates from the perspective of the balance of payments and current account.

B. Examine the view of the portfolio’s balance.

Describe how to calculate exchange rates using money.

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