Citrus Products Inc. is a medium-sized producer of citrus juice drinks with groves in Indian River County, Florida. Until now, the company has confined its operations and sales to the United States; but its CEO, George Gaynor, wants to expand into the Pacific Rim. The first step is to set up sales subsidiaries in Japan and Australia, then to set up a production plant in Japan, and finally to distribute the product throughout the Pacific Rim. The firm’s financial manager, Ruth Schmidt, is enthusiastic about the plan, but she worries about the implications of the foreign expansion on the firm’s financial management process. She has asked you, the firms most recently hired financial analyst, to develop a 1-hour tut0rial package that explains the basics of multinational financial management. The tut0rial will be presented at the next board of directors meeting. To get you started, Schmidt has given you the following list of questions.
a. Briefly describe the current international monetary system. What are the different types of exchange rate systems?
b. What effect does relative inflation have on interest rates and exchange rates?
c.1. Briefly explain the three major types of international credit markets.
2. Briefly explain how ADRs work.
j. What is the effect of multinational operations on capital budgeting decisions?
k. To what extent do average capital structures vary across different countries?