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International investment: the case of Yakisoba

Table of Content
1

Introduction ........................................................................................................................ 3

Question 1 .......................................................................................................................... 3

An evaluation of the project to purchase the noodle producer and ramen manufacture
in Hong Kong.......................................................................... Error! Bookmark not defined.
2.1

Evaluation Techniques ................................................................................................ 3

2.2

Risk-Adjusted Cost of Capital..................................................................................... 4

2.3

Application Problems and Considerations .................................................................. 4

Exchange Rate Risk Management Strategy ....................................................................... 4

Multinational Financial System ......................................................................................... 4

Suggest how Yakisoba might best organise its Treasury Function in order to take full
advantage of the Multinational Financial System. ........... Error! Bookmark not defined.
4.1

Centralized Treasure System ....................................................................................... 4

4.2

Multinational Financial System Management............................................................. 4


1

Capital Structure ................................................................................................................ 4


5.1

Financial Sources ........................................................................................................ 4

5.2

Capital Structure Risk Management ........................................................................... 4

Advice the company on the main risks associated with its present capital structure and
explain how these risks might be managed.......................... Error! Bookmark not defined.
5.3

Cost of Debt Capital .................................................................................................... 4

Briefly discuss how the chosen method(s) of finance might influence the cost of capital
used by Yakisoba to evaluate future investments. .............. Error! Bookmark not defined.
6

Conclusions ........................................................................................................................ 4

Introduction
Investment is a key part of building business (Yan et al., 2009). New assets such as

machinery can boost productivity, cut costs and give a competitive edge. Investments in
product development, research and development, expertise and new markets can open up
exciting growth opportunities. At the same time, it is required to avoid overstretching limited
financial resources or restricting your ability to pursue other options. Deciding where to focus
the investment is an essential part of making the most of potential (Dolzer and Schreuer,
2012).

Question 1

2.1

Evaluation Techniques

Inflation rate

Year 0

Year 1

Year 2

Year 3

Year 4

From Year 5

Hong Kong

3.0

3.0

3.0

3.0

3.0

3.0

UK

2.5

2.6

2.7

2.8

2.9

3.0

Exchange rate

Year 0

Year 1

Year 2

Year 3

Year 4

From Year 5

HK$/

15.00

15.06

15.10

15.13

15.15

15.15

million

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Cash flow

-5.00

0.66

0.83

1.03

1.29

1.61

1.61

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

-5.00

0.57

0.60

0.64

0.69

0.74

Present value

From
year 6
3.70

2.2

Risk-Adjusted Cost of Capital

2.3

Application Problems and Considerations

Exchange Rate Risk Management Strategy

Multinational Financial System

4.1

Centralized Treasure System

4.2

Multinational Financial System Management

Capital Structure

5.1

Financial Sources

5.2

Capital Structure Risk Management

5.3

Cost of Debt Capital

Conclusions

In this report, the Yokiobas project of purchasing the noodle producer and ramen
manufacture in Hong Kong has been evaluated. The hedging and budget rate is proposed as
the exchange rate risk management strategy for the Company. Moreover, the firms
multinational financial system is also presented and evaluated as well as other relevant
suggestions have been made in order to improve the financial management of Yokiobas
business performance.
This document is provided by:
VU Thuy Dung (Ms.)
Manager

Center for Online Writing Resources


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