| ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS) | ||
| END SEMESTER EXAMINATION – SEPT/OCT. 2015 | ||
| M.COM -III SEMESTER | ||
| P111306: INTERNATIONAL FINANCIAL MANAGEMENT | ||
| Duration: 3 Hours Max. Marks: 100 | ||
| SECTION – A | ||
| I. | Answer any SEVEN questions. Each carries 5 marks. (7×5=35) | |
| 1. | Firms have different modes to conduct international business. Elucidate | |
| 2. | Explain the four major facets that distinguishes international financial management with domestic financial management | |
| 3. | Balance of Payment of any country is affected by many factors. Elaborate | |
| 4. | Disequilibrium can be corrected with different measures taken by the economy. Suggest in detail what measures can be adopted. | |
| 5. | a) An importer expects appreciation of US $ while importing goods for
10,000 US $. So he goes for buying 10,000 US $ one month forward coinciding the time of payment for the import. The spot rate and the forward rates are respectively Rs. 60 and Rs.60.50 per US $. Surprisingly the future spot rate on maturity is only Rs.60.30/$. Will the forward deal be beneficial?
b) If the rate of exchange is: US $ 2.0000-2.0100/£ in New York US $ 1.9800-1.9810/£ in London Explain how the arbitrageurs will gain |
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| 6. | Critically explain the techniques of assessing country risk. | |
| 7. | What techniques are adopted to manage transaction/operating exposure? | |
| 8. | The Indian Government is promoting FDI. In this context explain some of the incentives provided in India and also the barriers that the multinational companies face to invest in India | |
| 9. | Determine balance of current a/c, capital a/c and net overall balance of
Payment from the following information of India during 2014-15.( in $ billion) Oil imported 240 Exported goods 200 Financial short term transaction outflow 6 Investment in Iran 22 Investment by US in India 36 Holdings with banks in foreign countries 8 Net services inflow 8 Unilateral transfer inflow 4 Investment income outflow 1 Non movement of gold outflow 1 Portfolio investment abroad 27 Portfolio investment in India 9 Loans repayment to other countries 12 Loans repayment by other countries 36 Errors and omissions (2)
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| 10. | How would you reduce exposure to host government takeovers? | |
| SECTION – B | ||
| II. | Answer any THREE questions. Each carries 15 marks. (3×15=45) | |
| 11. | Explain various risks that influence international financial markets. | |
| 12. | ‘Many agencies facilitate international flow of funds’. Explain. | |
| 13. | Leasing is an important technique to finance projects. Elucidate. | |
| 14. | ‘International Cash management means optimization of cash flows and investment of excess cash’ in this context explain the various techniques and common complications in optimizing cash flows. | |
| 15. | How would you incorporate international tax laws in multinational capital budgeting. | |
| SECTION – C | ||
| III. | Case Study (1×20=20) | |
| 16. |
Sales in domestic market -US $ 14 million Export -US $ 4 million Replacement of parents export- US $ 2 million Parents export of components to subsidiary- US $ 3 million Royalty payment by subsidiary- US $ 0.5 million Dividend flow to the parent- US $ 0.5 million
c. Find the BE salvage value if: Initial investment =$ 30 million The net cash inflow during the first and the second year respectively = $ 20 million and $ 15 million Discount rate =10%
d. A project of the foreign subsidiary has a beta of 1.10, the risk-free return of 15% and the required return on the market being estimated at 20 %. Find out the project’s cost of capital.
e. A firm with an overall debt-equity ratio of 1:2, an after tax cost of debt at 7 % and cost of equity capital at 15% is taking up a project abroad. The debt-equity norm of the foreign project is not different but the systematic risk pulls down the cost of equity to 12 %. Again, there is no; change in the expected after-tax cost of debt. Calculate the weighted average cost of capital. &&&&&&&&&&&&&&&&&&&&&&&
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