Ford Motor Company Case Analysis

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Table of Contents Abstract 3 The Rationale behind the Form of MNC Chosen 3 Figure 1 4 Main Currencies Utilized 5 Managing Foreign Exchange Exposure 5 Current Financial Issues 6 Figure 2: Brazil Inflation Rate 8 Exchange Rate Forecast 8 Table 1.0 9 Table 1.1 represents spot rates among the Barbados BDS, Brazilian Real and US Dollar 9 Test for Interest Rate Parity: 11 Table 2.0 11 Test for International Fisher Effect: 12 Table 3.0: 12 Table 3.1 13 Table 3.2 13 Expected Future Trend of Exchange Rates 14 Bibliography 15 Abstract This assignment seeks to display all we have done throughout the course; placing emphasis on issues that can occur because of Government intervention, the factors affecting the balance of trade, spot, future and forward rates, interest rate parity, international fisher effect and foreign exchange trends. Moreover, it will be analyzing the exchange rate risk, exposure and hedging techniques that can mitigate this exposure. The Rationale behind the Form of MNC Chosen Forward Motoring Company (FMC) has been involved in the production and distribution of multiple lines of vehicles in Barbados since 2003. At present, the company has been experiencing a satisfactory level of success in its current geographical location, but the company’s management perceives the Barbadian’s automobile market to be highly concentrated. Consequently, FMC has decided to establish a distributor in Brazil to boost its sales prospects so as to absorb a relatively fair percentage of the Brazilian automobile market share. Brazil’s economic conditions are harmonious with FMC’s revenue related motives based on a historical analysis on the country’s economic stability conducted by the company’s financial analyst. According to (Brazil GDP Annual Growth Rate, 2012): The Gross Domestic Product (GDP) in Brazil expanded 1.40% in the

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