Part -1:
1. Do you believe that the US government treated some financial institutions differently during the crisis? Was that appropriate?
2. Many experts argue that when the government bails out a private financial institution it creates a problem called "moral hazard", meaning that if the institution knows it will be saved, it actually has an incentive to take more risk, not less. What do you think?
3: Do you think that the U.S government should have allowed Lehman Brothers to fail?
Part -2:
1. Many Chinese critics had urged China to revalue the yuan by 20% or more. What would the Chinese yuan's value be per U.S. dollar if it (the yuan) had indeed been revalued by 20%? What would be the value of the U.S. dollar per yuan? (Note typo error in the book.. it should be" had indeed been revalued" and not devalued)
2. Do you believe the revaluation of the Chinese yuan was politically or economically motivated? Does becoming a member of the World Trade Organization by China in December 2001 play a role in how China will determine its future exchange rate?
3. If the Chinese yuan were to change by the maximum allowed per day, 0.3% against the U.S. dollar, consistently over a 30 or 60 day period, what extreme values might it reach?
4. Chinese multinationals would now be facing the same exchange rate-related risks borne by U.S., Japanese, and European multinationals. What do you believe would be the impact of this rising risk will be on the strategy and operations of Chinese companies in the near-future?
Part -3:
1. Why do you think Petrobrás's cost of capital is so high? Are there better ways, or other ways, of calculating its weighted average cost of capital?
2. Does this method of using the sovereign spread also compensate for currency risk?
3. Is the cost of capital really a relevant factor in the competitiveness and strategy of a company like Petrobrás? Does the corporate cost of capital really affect competitiveness?
4. Is the cost of capital really a relevant factor in the competitiveness and strategy of a company like Petrobrás? Does the corporate cost of capital really affect competitiveness
Part -4:
1. Which do you believe is most important for sustaining the sale of the new Carrera model, maintaining a profit margin or maintaining the U.S. dollar price?
2. Given the change in exchange rates and the strategy employed by Porsche, would you say that the purchasing power of the U.S. dollar customer has grown stronger or weaker?
3. In the long run, what do most automobile manufacturers do to avoid these large exchange rate squeezes?
Part -5:
Question 1: Which of the many debt characteristics - currency, maturity, cost, fixed versus floating rate - do you believe are of the highest priority for Julie and Tirstrup?
Question 2: Does the currency of denomination depend on the currency of the parent or the currency of the business unit that will be responsible for servicing debt?
Question 3: Exhibit 1 is Julie's spreadsheet analysis of what she considers relevant choices. Using these, what would you recommend as a financial package?