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negative interest rates to anchor inflation expectation and address price stability. In Denmark, the goal is to counter exchange rate pressures and safe haven inflows. However, Switzerland objective's for introducing negative interest rate is to reduce deflationary and appreciation pressures.
Barua and Majumdar (2016) point out that the interest rate of ECB (European Central Bank) is below zero. However, data in Eurozone reveals that ECB has recorded successes from negative interest policy because banks and households are recovering from the sovereign debt crisis and global financial crisis. The unorthodox policies assist in pushing up the aggregate demand, and liquidity thereby pushing the prices up and stimulate firm propensity… Continue Reading...
risk, in particular because of the contract nature that requires payments over a period of time. Foreign exchange rate risk will be discussed later in this report, but suffice to say there is an increased risk in the sterling-euro pairing on account of the uncertainty surrounding the Brexit vote (Chan, 2016).
The first number that has to be calculated is the cost of capital for South Coast. The formula is known as the weighted-average cost of capital. The weighted average cost of capital formula is as follows:
Source: Investopedia (2016, 2)
The market value is typically used to calculate WACC. The market value of the firm's equity… Continue Reading...
global financial stability by facilitating global trade that promotes job creation, poverty reduction and economic growth. It also encourages exchange rate stability and an open system for international payments. Secondly, the World Bank aids in trade liberalization, transference of information and knowledge to developing countries to underpin sustainable development. Lastly, the WTO established the General Agreement on Tariffs and Trade (GATT), which encompasses global trade in goods through the considerable decrease of tariffs and other trade barriers. The advancement of information technology has a positive impact on globalization by propagating the Global Use of IT and advancing the digital generation. Regardless of the positive impact of globalization, some of… Continue Reading...
exchange rates, and no credit card transaction fees when using bitcoin. Bitcoin can therefore be beneficial for vendors and consumers. One of the most notable and obvious uses for bitcoin was to conduct transactions on the “dark web,” where consumers can seek and find all types of contraband (Cox, 2015). Another notorious use for bitcoin is as a means of money laundering.
Yet from this initial purpose as a means to make anonymous and secure transactions, bitcoin has taken on a life of its own. Bitcoin is no longer just… Continue Reading...
company like Apple, foreign exchange rate and other forms of macroeconomic risk are important. Macroeconomic risk is risk associated with either interest rates, or other major changes in macroeconomic conditions, that might have a direct financial impact on the company. Interest rate risk, for example, is higher when the company has issued bonds or has other obligations that are at a set rate.
Foreign exchange rate risk can be a substantial source of risk for international companies. Apple’s products are assembled in China, from parts that are made either in China or other parts… Continue Reading...
indirect effects on the company. The major macroeconomic variables such as inflation, interest rates, unemployment, GDP, and exchange rates can all directly influence the financial performance of the company. But these variables also impact on things like government policy, so there are indirect impacts on financial performance as well, and the financial manager also needs to understand these.
The main tool that financial managers use are complex financial models. These models seek to illustrate the impact that different variables have on the company – both internal and external variable. Forecasts are created using different macroeconomic and market variables, and these forecasts can highlight a range of different… Continue Reading...
to offer a steady economic setting that is favourable to nurturing strong and sustainable economic growth. They fundamental elements of macroeconomic policy include monetary policy, fiscal policy, and exchange rate policy. Oil market shocks, in addition to domestic and foreign throughput, generate macroeconomic fluctuations in the economy (Crosby, 2012). Macroeconomic policies play a significant role in economies during periods of oil crisis. These policies are all the more imperative for West Africa as the volatility of oil prices in the past few years has instigated these key challenges into greater emphasis. Over a period of simply a few years, oil prices have fallen from $115 per barrel to $70 and further down to $50. These fluctuations can result… Continue Reading...
impact Apple Inc. both directly and indirectly. One of the key economic factors is the exchange rate in the market. It is imperative to note that Apple generates more than 60 percent of its entire sales from the global markets and for this reason its revenues are adversely impacted by the prevailing inclination of strengthening the dollar. In the 2014 financial year, chief executive officer (CEO) of Apple, Tim Cook, espoused an approach of hedging the currency with the main objective of easing the adverse impacts of the dollar becoming stronger. Nonetheless, these practices can solely recompense the losses incurred owing to the exchange rate… Continue Reading...
which implies that such currency has a devaluation in its purchasing power. Considering this, inflation influences the currency exchange rates, general prices and also prospective planned international capital investments. In this case, the exchange rates alludes to the purchasing power of currencies in emerging markets with respect to goods and services from the United States, and also the decline in the dollar with respect to goods and services from emerging markets (Mankiw, 2014).
Inflation can have an impact on planned capital investments for the company and the decisions made by the managers. Owing to inflation, there is an increase in the cost of raw materials as well as… Continue Reading...
A Total Cost Approach to Understanding Supply Chain Risk
Using the current exchange rate, what is the initial purchase cost per unit (in U.S. dollars) paid to Dong Hai Supply? (Do not include transportation costs.)
The exchange rate between the U.S. Dollar and the Chinese Renminbi is:
Dollar = 6.92 CNY China Yuan Renminbi
CNY China Yuan Renminbi = 0.1445 U.S. Dollar
The quoted price by Dong Hai Supply at the factory is 547 China Yuan Renminbi. Therefore, the initial purchase cost per unit is
The initial purchase cost is $79.04 for every unit (Frankel, 2013).
What is the average time for… Continue Reading...
to partake in trade with Brazil thanks to problems with exchange rates. Critics of the strategy believed Brazil gained all it could from the trading bloc and need to set up trade agreements with Europe and the United States.
Therefore, while it seemed viable to strengthen the Mercosur union, it was not feasible at the time due to the problems Argentina already experience and continues to experience and the underling exchange rate issues. Perhaps if there was a South American dollar kind of currency that every country in South America could use, then the Mercosur union would be more favorable.… Continue Reading...
the main purpose of stimulating the domestic economy, the measures of monetary policy have an indirect impact on the exchange rate, which in turn causes the currency to decline. QE causes the currency to weaken as it makes the exports to become comparatively cheaper and therefore stimulates the economy (Johnston, 2015). In fact, quantitative easing can be understood as a form of currency manipulation.
What happens to the U.S. debt and what effect does debt leveraging have?
The implementation of Quantitative Easing does have influence on the level of internal debt. However, it… Continue Reading...
Case
The initial purchase cost per unit paid to Dong Hai Supply is calculated as follows. The current exchange rate is 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar. As pointed out, the price per unit in Dong Hai supply is 547 ¥.
Therefore, the price per unit is 547 x 0.14646 = 80.11362.
The initial purchase cost per unit in U.S. Dollars is $80.11 (Frankel, 2013).
The average time for an order filling a TEU container to come from Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort Worth
Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort… Continue Reading...
