FIN 535 Blades Inc Case Chapter 7

Assignment 2

Blades, Inc. Case

1. One point of concern for you is that there is a trade-off between the higher interest rates in Thailand and the delayed conversion of baht into dollars. Explain what this means.

ANSWER: If the net baht-denominated cash flows are converted into dollars today, Blades will not be obligated to depreciation in the future; in the end, there would be a decrease in the dollar cash flows and a depreciation of the baht.

1. If the net baht received from the Thailand operation are invested in Thailand, how will U.S. operations be affected?

ANSWER: Essentially, Blades, Inc. will need to borrow additional funds in the United States due to the fact that in Thailand, the cash flow is used to support the U.S. operations. In order to...