Multinational Corporations (MNCs) & Theory of Purchasing Power Parity (PPP) Accounting Assignment Help

Assignment Task

Question 
a) Describe THREE (3) opportunities that multinational corporations (MNCs) may gain from the global presence.                                                                                                                       
b) Based on the theory of purchasing power parity (PPP), explain the general forecast of the values of currencies in countries with low inflation.                                                               
c) Explain what translation exposure and transaction exposure are in relation to foreign exchange risk.                                                                                                                        
d) Grand Co. (a UK firm) has beta of 1.14 and the stock market return in the U.S. is expected to be 18 percent annually while the long-term annualized risk-free rate in the is 8 percent.  Grand Co. borrows funds at an interest rate of 10 percent per year. Assuming that the firm is targeting 70 percent to be financed by debt and 30 percent would be financed by issuing common stock. The firm is subject to a 40% corporate tax rate.
i) Estimate the cost of issuing common stock.                                                                         
ii) Estimate the Weighted Average Cost of Capital (WACC).                                                   
e) An investor will invest his funds in any market to maximize profit. The one-year Malaysia interest rate is 6% and the US interest rate is 10%. The spot rate of RM/US$ is RM2.9500/US$ and the one year forward rate is RM2.9640/US$. Determine whether there is any interest arbitrage opportunity or not.                                                                                                   

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