Assume that Zurich Semiconductor Company (ZSC) wants to create a sponsored ADR program, worth $75 million, to trade its shares on the NASDAQ stock market. Assume that ZSC is currently selling on the SWX Swiss Exchange for SF25.00 per share, and the current dollar/Swiss franc exchange rate is $0.8000/SF.
American Bank and Trust (ABT) is handling the ADR issue for ZSC and has advised the company that the ideal trading price for high-technology shares on the NASDAQ is about $60 per share (or per ADR).
a. Describe the precise steps ABT must take to create an ADR issue that meets ZSC's preferences.
b. Assume that ZSC's stock price declines from SF25.00 to SF22.50 per share. If the exchange rate does not also change, what will happen to ZSC's ADR price?
c. If the Swiss franc depreciates from $0.8000/SF to $0.7500/SF, but the price of ZSC's shares remains unchanged in Swiss francs, how will ZSC's ADR price change?