Group 1: Blades, Inc.

Case
Decisions to Use International Financial Markets
Group members Minh Chau Sewa Mensah

Case Summary
Customer (Thailand) Blades Inc (US)

Supplier
Import: rubber & plastic Quantity: 72,000 pairs Price (CGS): THB 2,871/pair Int: TL 15% vs US 8% Export: speedos roller blades Quantity: 180,000 pairs Price: THB 4,594/pair Ex rate: 1 THB = 0.024 $

Revenue
Customer (Thailand) Blades Inc (US)

Supplier
Revenues in THB used to cover CGS Excess revenue was converted to US $
Support US production Invest in US

Interest rate: TL 15% vs US 8% Ben Holt: is it feasible of investing Blades excess funds in Thailand at an interest rate of 15%

Question 1: One point of concern for you is that there is a tradeoff between the higher interest rates in Thailand and the delayed conversion of baht into dollars. Explain what this means. Invest in where the interest rates are high Other influence factors: High interest rate dues to unstable economy THB depreciates against the US $ If the net cash flows in Thailand are converted into dollars today, Blades is not subject to any future depreciation of the baht that would result in less dollar cash flows.

Question 2: If the net baht received from the Thailand operation are invested in Thailand, how will U.S. operations be affected? (Assume that Blades is currently paying 10 percent on dollars borrowed, and needs more financing for its firm.)

Question 2

Interest: + 15% Depreciation: - 10% >> + 5%

- 10%: interest:

- Forgo the additional US interest expenses - Not worry about the THB depreciation