Assignment 1. FIN 649: DUE 6/13/21 by 11:59 pm. All assignments should be written in your own words and provide examples and opinions beyond the textbook or any other source you get them from. I will be looking for more of your opinions and examples beyond definitions. For calculations show ALL your steps included calculator/Excel keystrokes and/or formulas. It is also important to discuss your final answers it terms of what that answer represents. NOTE: With these assignments it is important to explain and briefly discuss your final answers or results and NOT just provide a number or quick answer. Please label your uploaded assignment file with your name. Chapter 1 1.What are two international opportunities for a Multinational Corporation (MNC) along with the benefits and concerns if you are a US corporation looking to expand? 2.What goes into the Valuation of an MNC? List and discuss at least two variables. Be specific. 3.Online Articles with Real World Examples on page 30-31 of the textbook. Select ANY FIVE (5) of the 10, provide the links AND summarize those articles in your OWN words and opinions. 4.Complete the Internet exercises on page 30 of the textbook. These should include the most recent information you find and summarized in your own words. Complete Questions 1 and 2. You may use any other online source to gather the information. Just keep your comments recent. Chapter 2 5.What are two exchange rate effects on Investing and Borrowing internationally and why? Briefly discuss a real example. 6.What role do foreign Stock Markets contribute to a MNC and why? Discuss at least two roles providing examples. 7.Problem 14 on page 60. Impact of Government Policies on Trade a,b,c. You may answer for ANY government (s) you like just keep them recent. 8.Complete the Internet exercises on page 62 of the textbook. These should include the most recent information you find and summarized in your own words. Complete Questions 1, 2 &3 only. You may use any other online source to gather the information. Just keep it recent as there is a lot to talk about here. 9. Multinational Financial Management and Flow of funds. After reading Chapters 1 & 2 please comment on the following: Remember to also respond to two peers with substance. Please read the chapters and keep up with course related current events. Multinational Corporations (MNCs) are companies that do business both domestically and internationally. Foreign investment and flow of funds play an important and key role to these companies. Its sometimes even difficult to determine where the company is officially housed with operations in many different parts of the world. This also applies to a company when it comes to sales, costs and profits. List and discuss one factor affecting foreign investment and flow of funds of an MNC to a country. Also, briefly discuss one advantage and one concern that the company may experience in our global economy along with your opinions. 1. First classmate Celina: There are many factors that affect the amount of foreign investment and flow of funds of a multinational corporation to a country. Factors affecting foreign investment and flow of funds include restrictions on direct foreign investment (DFI), privatization, potential economic growth in a particular country, tax rates, and exchange rates. Tax rates are an important factor that affects how much an MNC decides to invest in particular country. Countries with lower tax rates are more likely to attract DFI from foreign investors because companies are required to pay less taxes on their corporate income. Investors are less interested in paying taxes where countries have high tax rates because they have to forfeit earned revenue. One advantage to paying little or no corporate income tax in a particular country is that the MNC has the ability to reinvest the funds that would otherwise be provided to the government for taxes. A great example of a country with little or corporate tax rates is the Cayman Islands. Many U.S. MNCs incorporate or open corporate bank accounts in the Cayman Islands for their businesses because the Cayman Islands is a tax haven and does not require companies to pay corporate taxes for opening operations or engaging in international business in that country. As a result, companies are able to retain some of the funds they earned through business rather than owe income tax to governments. A disadvantage of corporate income taxes is that MNCs are still required to pay corporate income taxes in all other countries they conduct international business. For example, if a U.S. MNC chooses to open off-shore accounts in the Cayman Islands but also opens operations in the UK and Canada, the MNC is still required to pay corporate income taxes in the U.S., UK and Canada. Corporate income taxes can repel DFI to a particular country, but this can be problematic for the economy of that country, especially if it is a less-developed country looking attract funds for further development of their infrastructure and technology. In my opinion, this is an issue as some countries and their governments wish to develop and need corporations to pay taxes in order to build new buildings, schools, roads and transportation. Governments should have the ability to set a tax rate to best suit their country’s needs, but corporations should be required to pay a minimum tax rate in any country to support the country’s economy, which in turn supports the global economy. 2. Second classmate Dominick: When a Multinational Corporation looks towards new foreign investment opportunities, there are multiple factors that must be considered. The first important factor that often affects foreign investment decisions is wage rates in the foreign country. Depending on what the MNC is producing internationally, minimum wages may come into play as well as appropriate pay for jobs that require higher skill levels. These minimum and average wages vary globally and an MNC is often looking to invest in countries where these wages are lower on average in order to increase profit margins. Another important factor for the MNC to consider is tax rates within the country they plan to invest in. Companies target countries with lower corporate tax rates, because more of their revenues can become profits in these countries. Also countries with lower tax rates give investors more potential opportunities to invest in MNC’s. In short, low tax rates are good for both companies and potential investors in the company alike. Another concern for Multinational Corporations is the exchange rate volatility within a foreign country. If the currency is constantly fluctuating it can be a deterrent for investment within that country. MNC’s search for opportunities in countries with stable currencies to go along with lower tax rates and lower wages. Transportation costs can affect investments too; companies obviously prefer lower transportation costs when deciding where to invest. Once a Multinational Corporation decides to invest in one foreign country, there are a few common types of entry the company must consider. These means of entry include: acquiring an existing company, establishing a new foreign subsidiary, and a joint venture. Acquiring an already established company can be advantageous because it allows for the MNC to instantly obtain part of the market for their product. If the MNC can improve on the acquired company’s business model, the arrival of the MNC can become successful in a short amount of time. The drawback to this method of entry is the large amount of capital that it requires from the MNC in order to buy out the other company. Establishing a new subsidiary within a foreign country may require less capital upfront, however it can be difficult to achieve. An MNC that attempts to use this method to enter the foreign marketplace will in most cases lose money initially until they manage to appropriate a piece of the market for their product. A joint venture may be another option for entry. In a joint venture, the MNC shares ownership and operations with another firm that already resides in the marketplace. An example of a joint venture is General Mills Inc. using Nestlé SA to help distribute General Mills’ cereal in Asia. Joint Ventures can be profitable for both companies involved and can make entry somewhat easier than the other two options. A Multinational Corporation must weigh all of the previously mentioned factors when deciding to enter a new foreign market, and find the right situation before deciding to invest internationally.