ASSIGNMENT

Assignment

Part A

i.

The Amount the Exporter Will Receive If He Holds The B/A Until Maturity

= $40,000,000 x [1 - (.02 x 90/360)]

= $40,000,000 x 0.995

= $ 3,9800,000

The amount the exporter will receive if he discounts the b/a with the importer's bank

= $40,000,000 x [1 - ((.08 + .02) x 90/360)]

= $40,000,000 x 0.975

=$ 39,000,000

ii

When a country's government offers below-market financing directly to foreign importers, or offers loan guarantees to domestic banks financing the foreign import, or provides low cost credit insurance to U.S. exporters to alleviate the commercial and political risk in the sale, it is using taxpayers' money to subsidize foreign trade. Consequently, the foreign trade is not paying for itself(Bathala Moon Rao 1994 pp.12). Nevertheless, if most governments of developed countries offer such assistance to their domestic exporters, it is difficult for one to refuse if the country desires to have its export-oriented industries remain competitive.

Part B

i.

Increasing shareholder value needs strategic planning. The aim of the company should be to:

1) Reduce cost base while maintaining revenue.

2) Increase revenue share and reduce cost.

Any strategy that aims for these two goals will increase the shareholder value. This article discusses how this can be achieved to increase shareholder value.

Why Companies fail to Increase Shareholder Value;

Many companies fail to increase shareholder value due to faulty strategies. Let us discuss some common mistakes they make.

1) Exposing Capital Base to Risks Many companies try to increase shareholder value by risking their capital base. This is not successful since the company stands to lose the value of its shares.

2) Bad Strategy A bad strategy puts the company at more risk. An incomplete strategy can increase risks while lowering the shareholder value.

3) Greater Risk Assumption Greater risk assumption may be too hard for companies to absorb. This can lower the shareholder value.

How to Increase Shareholder Value

Intellectual property is one of the keys to increasing shareholder value. Enhancing the value of intellectual property is one way to increase shareholder value. Intellectual property strategies for increasing shareholder value are of the following kinds:

1) Defensive Stage If your company is at this stage, you are probably looking for a patent strategy that will protect your assets from a reactive lawsuit. You will probably try to get as many patents as you can and negotiate with competitors for mutual use of the products patented.

2) Cost Control Stage Companies at the cost control stage look for cost effective ways to enhance their patent portfolios. This can be done by choosing patents carefully, and taking out patents in different regions depending on the cost factor.

3) Profit Center Level Apart from taking cost cutting measures, profit center level companies also develop strategies to increase profits by selling patents. One of their strategies is to bring up lawsuits against those who violate patent norms.

4) Integration Level The integration level companies not just deal with strategies relating to patents for their own company, but also other companies that hire their services. They increase shareholder value through mergers, acquisitions or by using intellectual property as ...