Global Investing

Written by Admin
Posted July 27, 2009 at 12:15 pm

Global Investing » Blog Archive » Call that a money market fund …
To try and restore confidence, and help investors make a distinction between the conservative funds and those that are more yield-seeking, industry associations IMMFA and EFAMA are reclassifying the European sector into “short term” … read more…

Global recession to hit investment in IT training market
BANGALORE – Investment in IT training and software certification is set to decline by 25 percent in the Asia-Pacific region this fiscal as budgets on tech spending fall due to recession, a study by IT research and advisory firm Gartner … read more…

Global Investing » Blog Archive » The Big Five: themes for the …
FX reserves, U.S. and Chinese foreign exchange policy, who should do what to correct global imbalances, and trade issues will be on traders’ minds as the U.S.-China Strategic and Economic Dialogue kicks off early in the week. … read more…

From Google Blog Search

7 Reasons to Start Trading On the Forex Currency Market
Do you want to invest in a market where you can make big money? Want to take a piece of a 2 trillion dollar daily trade business? The Forex currency market is for you then. Read on to find eve… read more…

Getting Easy Money for Investing
Given the state of today’s global economy, many people are worried about investing their money in the right spot. Markets shift continuously, housing prices fluctuate, and almost every other kind of i… read more…

Advantages And Disadvantages Of Solar Power
One of the main disadvantages is the startup cost of the equipment. Solar energy technology is still a costly alternative to the use of readily available fossil fuel technologies, but that price gap i… read more…

From GoArticles.com

Rightside Advisor’s Global Investing

This is a commercial for Vivian Lewis’s Global Investing

Open Question: Finance Experts please help me! Urgent!?
XXX is a multinational company. Growing concerns over a possible global recession, a volatile foreign exchange market and the current tightening of loan exposures by many financial institutions within the country impact on many of the financial decisions that a company makes. In a way, the company was fortunate hat it had a low financial risk exposure as it had a little external borrowings, and its gearing ratio was very much less than that of the industry. In addition, there was still a demand for its exports to emerging markets and this situation is likely to remain. The company’s present earnings, which are strong, are likely to remain the same into the future. The strategic objective of MM now is to invest in projects that maintain the company’s value while waiting for global recovery from the financial crisis.

At a meeting last year, when the global and domestic financial environments were more stable, the Board of Directors of XXX had made some major strategic financial decisions regarding the company’s future business. Recent developments in the financial markets and the global economy had prompted the Board of Directors to request for a re-examination of many of the assumptions that were taken earlier in making many of those strategic financial decisions.
The Board of Directors is schedule to meet tomorrow. Prior to the meeting, one of the Directors examined the board papers on some of the financial decisions made. He sought your clarification as the Chief Financial Officer on some of the points made relating to the various financial decisions stated below:

2. In the investment appraisal, it was decided then that the cost of this project amounting to RM50 million would be financed entirely by debt. The cost of capital for the investment appraisal should not be the company’s weighted average cost of capital. Instead a revised cost of capital using the investment’s beta should be used, the financial institution arranging the debt had given a commitment to the load despite the tight liquidity position in the market now. However, no decision has yet been made by MM on the tenor of the loan that is the mixture of the loan, or whether a fixed or floating rate loan should be taken. At the time when the decision was made, the yield curve was positive. The Board’s recommendation then was that a fixed interest rate loan should be taken. The yield curve is flat now but is likely to turn negative should the Government’s stimulus package failed to achieve its desired objective of turning the economy around.

The Director’s concern:
i)Why should the cost of the project amounting to RM50 million be raised entirely by debt and not equity since raising debt would impose greater interest costs on the company and increases the financial risk of the company?

ii)Why was the rate used to discount the investment project not the company’s present weighted average cost of capital but instead a revised cost of capital using the investment’s beta. How was that cost of capital derived?

iii)Given the change scenario on market interest rates, how should the loan be raised, that is the volume mix of loan, to finance the investment cost of RM50 million, to fund the loan using a fixed or floating interest rates and how is the risk on interest rates be hedged should market sentiments on interest rates changes?

*Please help me to solve this question, i didn’t study finance at all! =.=*