Exchange rates can influence both the amount and allocation of foreign direct investment (FDI) in several ways. When a currency depreciates, it reduces costs and wages in that country, making it more attractive for FDI. However, anticipated exchange rate movements may be reflected in financing costs. Empirical evidence also supports the influence of exchange rates on FDI through relative wealth and firm-specific asset effects. Exchange rate volatility can also impact FDI through production flexibility and risk aversion channels, with short-term volatility more likely to deter FDI through risk aversion. Both exchange rate levels and volatility can influence the internationalization of production through FDI.
Country Risk incorporating into capital budgeting1Country Risk CruzIbarra161
Country Risk incorporating into capital budgeting 1
Country Risk incorporating into capital budgeting 8
Foreign Direct Investment is an investment that a multinational corporation makes in a host country where they act as a parent company and have control and earn a private return. The collaboration between companies, the cross-border partnership can facilitate long-term business solutions. Foreign firms through geographic diversification can safeguard themselves from supply chain disruption and can enhance the economic prospects of both host country and parent country. One of the perplexing issues faced in international business lies within the political and financial risk in project investment. Political risk can be defined as the risk which affects the cash flow of any company dealing in international business and investment which is affected by a change in government action. A subject matter of paradox gets its exposure when several authors and scholars vouch for the way capital budgeting is explained and practiced. The general observation in a corporate finance world is the increase in the value of shareholders with NPV being positive. The project cash flow can be forecasted followed by discounting method at a discounting rate to reflect the price that the capital market is charging for the risk in cash flow; hence the derivation for NPV (Guo & Zheng,2020). The investors only consider the systematic risk of the project while ignoring the imperfection that is captured in the capital market in the case of capital budgeting. It is also believed that that quantification of the political risk is a difficult task even for investors.
In this paper, we will explore the country's risk in a broader aspect and incorporate it with the concepts of capital budgeting. It will also contain empirical evidence of FDI for an Australian company, AUF, investing in a software development business in India. The aim is to investigate the country-specific political and financial risk associated with India and its effect on the capital budgeting decision-making process. To ensure optimality, the key decision-makers often use a rule of thumb while dealing with the high deliberation cost involved in the political risk; thereby supporting the concepts of bounded rationality. Reviewed Literature
FDI involves mergers and acquisitions, reinvesting profits earned from operations carried out in the different countries, the building of new facilities, and company loans. FDI is the control over the firm and can be in any form including joint venture, technological transfer, and enterprise. Globalization has made a severe impact on living standards and trade and has raised the FDI in the international market as well.
1.1. Theories
The competitive position of the Australian firms in the global market makes it an acquirer of companies in host countries where the parent firm through its dynamic capability owing to their knowledge and utilization of the available resources hel ...
Running Head FINC 420 International FinanceE.docxjoellemurphey
Running Head: FINC 420 International Finance
Exchange Rate Forecasting
Each country is encouraging foreign investment due to their realization of the benefits associated to opening for the foreign investments. Foreign investments have enhanced the expansion of multiple business opportunities and many ventures are looking for foreign investors so that they are able to increase capital budgets and the technical expertise. This may also in turn enhance the management practices of such companies. The type of foreign investment that is most common is the Foreign Direct Investment (FDI). This is the act of investing capital in an enterprise that carries out its activities in another foreign country. The investment can be done by an individual a company or a group of companies. The investor is granted a control of 10% of the shares of the enterprise he invests into and they also enjoy a share of profits too. Due to the fact that the investor is a foreign party, different policies, regulations and governing factors are applied (Sornarajah, 2010). Both parties will enjoy some benefits and may still suffer some disadvantages in relation to various factors.
FD1 and exchange rates
One of the factors that that may influence the activity of FDI is the forecasting of the behavior of foreign exchange rates. Exchange rates can be defined as the price of a foreign currency in the domestic currency. They matter in their volatility and their levels. The foreign exchange rate influences the total foreign direct investment amounts to be allocated in different countries. When a currency loses its value, this means that its value decreases relatively to the other currencies value. We can use the FDI to forecast the foreign currency rate. For example, if the wages of a country and its production costs reduces this indicates a reduction in the value of tat countries exchange rate. This movement attracts foreign investors and the depreciation of the currency exchange rate improves the rate of return to foreign investors. The main disadvantage of this investment in forecasting the foreign exchange rate occurs in case of an offsetting increase in production costs and wages in a destination market for capital investment. Anticipating the movements of the exchange rate will also diminish the relative wage importance and resulting to a higher financing cost of the investment project.
FDI and Interest Parity
Interest rate parity has a major role in the foreign exchange markets. It connects the spot exchange rates, the foreign exchange rates and the interest rates. Forecasted exchange rates may reflect higher foreign financing costs since the conditions of the interest rate parity tend to equalize the risk adjusted forecasted rate of returns. FDI implications of the foreign exchange rates are relevant to the interest- parity caveat (Sornarajah, 2010). However there are some arguments against this relevance. Some experts argue that there is an imper ...
Country Risk incorporating into capital budgeting1Country Risk CruzIbarra161
Country Risk incorporating into capital budgeting 1
Country Risk incorporating into capital budgeting 8
Foreign Direct Investment is an investment that a multinational corporation makes in a host country where they act as a parent company and have control and earn a private return. The collaboration between companies, the cross-border partnership can facilitate long-term business solutions. Foreign firms through geographic diversification can safeguard themselves from supply chain disruption and can enhance the economic prospects of both host country and parent country. One of the perplexing issues faced in international business lies within the political and financial risk in project investment. Political risk can be defined as the risk which affects the cash flow of any company dealing in international business and investment which is affected by a change in government action. A subject matter of paradox gets its exposure when several authors and scholars vouch for the way capital budgeting is explained and practiced. The general observation in a corporate finance world is the increase in the value of shareholders with NPV being positive. The project cash flow can be forecasted followed by discounting method at a discounting rate to reflect the price that the capital market is charging for the risk in cash flow; hence the derivation for NPV (Guo & Zheng,2020). The investors only consider the systematic risk of the project while ignoring the imperfection that is captured in the capital market in the case of capital budgeting. It is also believed that that quantification of the political risk is a difficult task even for investors.
In this paper, we will explore the country's risk in a broader aspect and incorporate it with the concepts of capital budgeting. It will also contain empirical evidence of FDI for an Australian company, AUF, investing in a software development business in India. The aim is to investigate the country-specific political and financial risk associated with India and its effect on the capital budgeting decision-making process. To ensure optimality, the key decision-makers often use a rule of thumb while dealing with the high deliberation cost involved in the political risk; thereby supporting the concepts of bounded rationality. Reviewed Literature
FDI involves mergers and acquisitions, reinvesting profits earned from operations carried out in the different countries, the building of new facilities, and company loans. FDI is the control over the firm and can be in any form including joint venture, technological transfer, and enterprise. Globalization has made a severe impact on living standards and trade and has raised the FDI in the international market as well.
1.1. Theories
The competitive position of the Australian firms in the global market makes it an acquirer of companies in host countries where the parent firm through its dynamic capability owing to their knowledge and utilization of the available resources hel ...
Running Head FINC 420 International FinanceE.docxjoellemurphey
Running Head: FINC 420 International Finance
Exchange Rate Forecasting
Each country is encouraging foreign investment due to their realization of the benefits associated to opening for the foreign investments. Foreign investments have enhanced the expansion of multiple business opportunities and many ventures are looking for foreign investors so that they are able to increase capital budgets and the technical expertise. This may also in turn enhance the management practices of such companies. The type of foreign investment that is most common is the Foreign Direct Investment (FDI). This is the act of investing capital in an enterprise that carries out its activities in another foreign country. The investment can be done by an individual a company or a group of companies. The investor is granted a control of 10% of the shares of the enterprise he invests into and they also enjoy a share of profits too. Due to the fact that the investor is a foreign party, different policies, regulations and governing factors are applied (Sornarajah, 2010). Both parties will enjoy some benefits and may still suffer some disadvantages in relation to various factors.
FD1 and exchange rates
One of the factors that that may influence the activity of FDI is the forecasting of the behavior of foreign exchange rates. Exchange rates can be defined as the price of a foreign currency in the domestic currency. They matter in their volatility and their levels. The foreign exchange rate influences the total foreign direct investment amounts to be allocated in different countries. When a currency loses its value, this means that its value decreases relatively to the other currencies value. We can use the FDI to forecast the foreign currency rate. For example, if the wages of a country and its production costs reduces this indicates a reduction in the value of tat countries exchange rate. This movement attracts foreign investors and the depreciation of the currency exchange rate improves the rate of return to foreign investors. The main disadvantage of this investment in forecasting the foreign exchange rate occurs in case of an offsetting increase in production costs and wages in a destination market for capital investment. Anticipating the movements of the exchange rate will also diminish the relative wage importance and resulting to a higher financing cost of the investment project.
FDI and Interest Parity
Interest rate parity has a major role in the foreign exchange markets. It connects the spot exchange rates, the foreign exchange rates and the interest rates. Forecasted exchange rates may reflect higher foreign financing costs since the conditions of the interest rate parity tend to equalize the risk adjusted forecasted rate of returns. FDI implications of the foreign exchange rates are relevant to the interest- parity caveat (Sornarajah, 2010). However there are some arguments against this relevance. Some experts argue that there is an imper ...
Constant changes in exchange rates affect multinational corporations. This short article highlights the reasons why executives of such companies should be concerned about exchange rates fluctuations
Covered interest parity a law of nature in currency marketsGE 94
CIP is a cornerstone principle in international finance. First described by John Maynard Keynes in 1923, the idea that FX forward rates must reflect interest rate differentials between currencies has long been considered one of the best tested theories in financial economics. If a market participant is willing to swap a higher yielding currency for a lower yielding currency over some time horizon, he must be compensated for the difference in yield via an adjusted forward price. Otherwise an arbitrage opportunity arises until prices and interest rates align again.
The financial crisis and direct aftermath revealed cracks in the armour of CIP. In a market environment with scarce liquidity and high credit risks in forward markets, dealers were constrained in their ability to profit from what was previously regarded as an almost risk-free arbi¬trage trade. But as conditions in financial markets slowly normalised after the crisis, CIP deviations remained and cross-currency basis never returned to its pre-crisis levels. After narrowing for some time, it started to widen again across most G10 pairs since approximately 2015. Increasingly, FX forward markets seemingly do not reflect what would be expected given the observed interest rate differentials. Figure 1 illustrates these dynamics by depicting the magnitude of G10 cross-currency basis over time for an exemplary three-month tenor.
· Respond to 3 posts listed below. Advance the conversation; provi.docxLynellBull52
· Respond to 3 posts listed below. Advance the conversation; provide a real-world application and experiential examples;
· Conceptually discuss your key [most significant] learning insight or take-away from the selected forum topic comments.
· Responses should be a minimum of 150-250 words, supported by at least one reference outside of the textbook (use academic journals), either supporting or refuting the position of the author of the forum topic response or peer response.
Topic #1: The Cost of Capital
The cost of capital refers to the “cost” a company must incur in order to use funds towards a new project or investment. The funds may come from lenders by borrowing the funds, by financing equity, or by selling bonds or assets. The cost of capital is expressed as an annual interest rate that the company will be charged on the capital funds. Therefore, this is the minimum return a company must be striving for when undertaking a new project, making a purchase, or making an investment. Otherwise, they are simply losing money.
The cost of capital is used as the minimum rate of return that the project must achieve and is also the rate that is used in a discounted cash flow analysis. If the return of future net cash flows on an investment or project are greater than the cost of capital, then the investment or project is worthwhile to the business. For example, if a project generates a return of 20% and the cost of capital was estimated at 15%, then this project has added value to the business.
In addition, the NPV formula can be used to compare multiple projects using different costs of capital. For instance, Project A and Project B compared by using 10%, 15%, and 20% costs of capital. This can allow businesses to see how investing more or less capital would affect the outcome of the NPV. Just as you can compare these different costs of capital, you can also add the element of risk into your calculations by increasing the cost of capital to reflect a riskier project or investment. Very simply put, if investment B is riskier than investment A, then you could compare them with B having a cost of capital at r = 15% and A having a cost of capital at r= 10% - therefore adjusting for one project/investment being riskier than the other.
Interestingly, there has been much discussion and debate over how companies set their cost of capital rates. In the case of large Fortune 500 companies, they spend hundreds of billions of dollars per year. If they miscalculate the cost of capital rate on an investment or project with a difference of even 1%, this could mean a gain or loss of billions of dollars depending on which way the value was incorrectly estimated. For example, if a company plans to invest $52 million dollars into a new project that is estimated to bring in $10.5 million per year over the next seven years, and the company incorrectly estimates the cost of capital by 1%, then you can see by the table below the affect this small percentage pot.
Foreign Exchange ExposureWhat is it and How it Affects t.docxhanneloremccaffery
Foreign Exchange Exposure
What is it and How it Affects the Multinational Firm?
What is Foreign Exchange Exposure?Simply put, foreign exchange exposure is the risk associated with activities that involve a global firm in currencies other than its home currency.Essentially, it is the risk that a foreign currency may move in a direction which is financially detrimental to the global firm.Given our observed potential for adverse exchange rate movements, firms must:Assess and Manage their foreign exchange exposures.
Does Foreign Exchange Exposure Matter? What do Global Firms SayNike: “Our international operations and sources of supply are subject to the usual risks of doing business abroad, such as possible revaluation of currencies…” (2005).Starbucks: “In fiscal 2004, international company revenue [in US dollars] increased 32%, [in part] because of the weakening U.S. dollar against both the Canadian dollar and the British pound.” (2005).McDonalds: “In 2000, the weak euro, British pound and Australian dollar had a negative impact upon reported [US dollar] results.” (2000).
*
FX Exposure and the Valuation of a MNC
where E(CF$,t) represents expected cash flows to be received at the end of period t, n represents the number of periods into the future in which cash flows are received, andk represents the required rate of return by investors.
*
Impact of Foreign Exchange Exposure
where CFj,t represents the amount of cash flow denominated in a particular foreign currency j at the end of period t,
Sj,t represents the exchange rate at which the foreign currency (measured in dollars per unit of the foreign currency) can be converted to dollars at the end of period t.
Global Companies and FX ExposureWhat are the specific risks to a global firm from foreign exchange exposure?Cash inflows and outflows, as measured in home currency equivalents, associated with foreign operations can be adversely affected.Revenues (profits) and CostsSettlement value of foreign currency denominated contracts, in home currency equivalents, can be adversely affected.For Example: Loans in foreign currencies.The global competitive position of the firm can be affected by adverse changes in exchange rates.Influence on required return.End Result: The value (market price) of the firm can be adversely affected.
Types of Foreign Exchange ExposureThere are three distinct types of foreign exchange exposures that global firms may face as a result of their international activities.These foreign exchange exposures are:Transaction exposureAny MNC engaged in current transactions involving foreign currencies.Economic exposureResults for future and unknown transactions in foreign currencies resulting from a MNC long term involvement in a particular market.Translation exposure (sometimes called “accounting” exposure).Important for MNCs with a physical presence in a foreign country.We will develop each of these in the slides which follow.
Transaction ExposureTran ...
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
Constant changes in exchange rates affect multinational corporations. This short article highlights the reasons why executives of such companies should be concerned about exchange rates fluctuations
Covered interest parity a law of nature in currency marketsGE 94
CIP is a cornerstone principle in international finance. First described by John Maynard Keynes in 1923, the idea that FX forward rates must reflect interest rate differentials between currencies has long been considered one of the best tested theories in financial economics. If a market participant is willing to swap a higher yielding currency for a lower yielding currency over some time horizon, he must be compensated for the difference in yield via an adjusted forward price. Otherwise an arbitrage opportunity arises until prices and interest rates align again.
The financial crisis and direct aftermath revealed cracks in the armour of CIP. In a market environment with scarce liquidity and high credit risks in forward markets, dealers were constrained in their ability to profit from what was previously regarded as an almost risk-free arbi¬trage trade. But as conditions in financial markets slowly normalised after the crisis, CIP deviations remained and cross-currency basis never returned to its pre-crisis levels. After narrowing for some time, it started to widen again across most G10 pairs since approximately 2015. Increasingly, FX forward markets seemingly do not reflect what would be expected given the observed interest rate differentials. Figure 1 illustrates these dynamics by depicting the magnitude of G10 cross-currency basis over time for an exemplary three-month tenor.
· Respond to 3 posts listed below. Advance the conversation; provi.docxLynellBull52
· Respond to 3 posts listed below. Advance the conversation; provide a real-world application and experiential examples;
· Conceptually discuss your key [most significant] learning insight or take-away from the selected forum topic comments.
· Responses should be a minimum of 150-250 words, supported by at least one reference outside of the textbook (use academic journals), either supporting or refuting the position of the author of the forum topic response or peer response.
Topic #1: The Cost of Capital
The cost of capital refers to the “cost” a company must incur in order to use funds towards a new project or investment. The funds may come from lenders by borrowing the funds, by financing equity, or by selling bonds or assets. The cost of capital is expressed as an annual interest rate that the company will be charged on the capital funds. Therefore, this is the minimum return a company must be striving for when undertaking a new project, making a purchase, or making an investment. Otherwise, they are simply losing money.
The cost of capital is used as the minimum rate of return that the project must achieve and is also the rate that is used in a discounted cash flow analysis. If the return of future net cash flows on an investment or project are greater than the cost of capital, then the investment or project is worthwhile to the business. For example, if a project generates a return of 20% and the cost of capital was estimated at 15%, then this project has added value to the business.
In addition, the NPV formula can be used to compare multiple projects using different costs of capital. For instance, Project A and Project B compared by using 10%, 15%, and 20% costs of capital. This can allow businesses to see how investing more or less capital would affect the outcome of the NPV. Just as you can compare these different costs of capital, you can also add the element of risk into your calculations by increasing the cost of capital to reflect a riskier project or investment. Very simply put, if investment B is riskier than investment A, then you could compare them with B having a cost of capital at r = 15% and A having a cost of capital at r= 10% - therefore adjusting for one project/investment being riskier than the other.
Interestingly, there has been much discussion and debate over how companies set their cost of capital rates. In the case of large Fortune 500 companies, they spend hundreds of billions of dollars per year. If they miscalculate the cost of capital rate on an investment or project with a difference of even 1%, this could mean a gain or loss of billions of dollars depending on which way the value was incorrectly estimated. For example, if a company plans to invest $52 million dollars into a new project that is estimated to bring in $10.5 million per year over the next seven years, and the company incorrectly estimates the cost of capital by 1%, then you can see by the table below the affect this small percentage pot.
Foreign Exchange ExposureWhat is it and How it Affects t.docxhanneloremccaffery
Foreign Exchange Exposure
What is it and How it Affects the Multinational Firm?
What is Foreign Exchange Exposure?Simply put, foreign exchange exposure is the risk associated with activities that involve a global firm in currencies other than its home currency.Essentially, it is the risk that a foreign currency may move in a direction which is financially detrimental to the global firm.Given our observed potential for adverse exchange rate movements, firms must:Assess and Manage their foreign exchange exposures.
Does Foreign Exchange Exposure Matter? What do Global Firms SayNike: “Our international operations and sources of supply are subject to the usual risks of doing business abroad, such as possible revaluation of currencies…” (2005).Starbucks: “In fiscal 2004, international company revenue [in US dollars] increased 32%, [in part] because of the weakening U.S. dollar against both the Canadian dollar and the British pound.” (2005).McDonalds: “In 2000, the weak euro, British pound and Australian dollar had a negative impact upon reported [US dollar] results.” (2000).
*
FX Exposure and the Valuation of a MNC
where E(CF$,t) represents expected cash flows to be received at the end of period t, n represents the number of periods into the future in which cash flows are received, andk represents the required rate of return by investors.
*
Impact of Foreign Exchange Exposure
where CFj,t represents the amount of cash flow denominated in a particular foreign currency j at the end of period t,
Sj,t represents the exchange rate at which the foreign currency (measured in dollars per unit of the foreign currency) can be converted to dollars at the end of period t.
Global Companies and FX ExposureWhat are the specific risks to a global firm from foreign exchange exposure?Cash inflows and outflows, as measured in home currency equivalents, associated with foreign operations can be adversely affected.Revenues (profits) and CostsSettlement value of foreign currency denominated contracts, in home currency equivalents, can be adversely affected.For Example: Loans in foreign currencies.The global competitive position of the firm can be affected by adverse changes in exchange rates.Influence on required return.End Result: The value (market price) of the firm can be adversely affected.
Types of Foreign Exchange ExposureThere are three distinct types of foreign exchange exposures that global firms may face as a result of their international activities.These foreign exchange exposures are:Transaction exposureAny MNC engaged in current transactions involving foreign currencies.Economic exposureResults for future and unknown transactions in foreign currencies resulting from a MNC long term involvement in a particular market.Translation exposure (sometimes called “accounting” exposure).Important for MNCs with a physical presence in a foreign country.We will develop each of these in the slides which follow.
Transaction ExposureTran ...
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
Skye Residences | Extended Stay Residences Near Toronto Airportmarketingjdass
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Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
Attending a job Interview for B1 and B2 Englsih learnersErika906060
It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
3.0 Project 2_ Developing My Brand Identity Kit.pptx
ERandFDIArticleGoldberg.pdf
1. Exchange Rates and Foreign Direct Investment
Written for the Princeton Encyclopedia of the World Economy (Princeton University
Press)
By Linda S. Goldberg1
Vice President, Federal Reserve Bank of New York
Foreign Direct Investment (FDI) is an international flow of capital that provides a parent
company or multinational organization with control over foreign affiliates. By 2005, inflows of
FDI around the world rose to $916 billion, with more than half of these flows received by
businesses within developing countries.2 One of the many influences on FDI activity is the
behavior of exchange rates. Exchange rates, defined as the domestic currency price of a foreign
currency, matter both in terms of their levels and their volatility. Exchange rates can influence
both the total amount of foreign direct investment that takes place and the allocation of this
investment spending across a range of countries.
When a currency depreciates, meaning that its value declines relative to the value of
another currency, this exchange rate movement has two potential implications for FDI. First, it
reduces that country’s wages and production costs relative to those of its foreign counterparts.
All else equal, the country experiencing real currency depreciation has enhanced "locational
advantage" or attractiveness as a location for receiving productive capacity investments. By this
1 Federal Reserve Bank of New York and NBER. The views expressed in this paper are those of the
individual author and do not necessarily reflect the position of the Federal Reserve Bank of New York or
the Federal Reserve System. Address correspondences to Linda S. Goldberg, Federal Reserve Bank of NY,
Research Department, 33 Liberty St, New York, N.Y. 10045. email: Linda.Goldberg@ny.frb.org,
2 2006 World Investment Report (United Nations).
2. “relative wage” channel, the exchange rate depreciation improves the overall rate of return to
foreigners contemplating an overseas investment project in this country.
The exchange rate level effects on FDI through this channel rely, on a number of basic
considerations. First, the exchange rate movement needs to be associated with a change in the
relative production costs across countries, and thus should not be accompanied by an offsetting
increase in the wages and production costs in the destination market for investment capital.
Second, the importance of the “relative wage” channel may be diminished if the exchange rate
movements are anticipated. Anticipated exchange rate moves may be reflected in a higher cost of
financing the investment project, since interest rate parity conditions equalize risk-adjusted
expected rates of returns across countries. By this argument, stronger FDI implications from
exchange rate movements arise when these are unanticipated and not otherwise reflected in the
expected costs of project finance for the FDI.
Some experts on FDI implications of exchange rate changes dismiss the empirical
relevance of the interest-parity type of caveat. Instead, it is argued that there are imperfect
capital market considerations, leading the rate of return on investment projects to depend on the
structure of capital markets across countries. For example, Froot and Stein (1991) argue that
capital markets are imperfect and lenders do not have perfect information about the results of
their overseas investments. In this scenario, multinational companies, which borrow or raise
capital internationally to pay for their overseas projects, will need to provide their lenders some
extra compensation to cover the relatively high costs of monitoring their investments abroad.
Multinationals would prefer to finance these projects out of internal capital if this were an option,
since internal capital is increasing in the parent company’s wealth.
3. Consider what occurs when exchange rates move. A depreciation of the destination
market currency raises the relative wealth of source country agents and can raise multinational
acquisitions of certain destination market assets. To the extent that source country agents hold
more of their wealth in own currency-denominated form, a depreciation of the destination
currency increases the relative wealth position of source country investors, lowering their
relative cost of capital. This allows the investors to bid more aggressively for assets abroad.
Empirical support for this channel is provided by Klein and Rosengren (1994), who show that
the importance of this relative wealth channel exceeded the importance of the relative wage
channel in explaining FDI inflows to the United States during the period from 1979 through
1991.
Blonigen (1997) makes a “firm-specific asset” argument to support a role for exchange
rates movements in influencing FDI. Suppose that foreign and domestic firms have equal
opportunity to purchase firm-specific assets in the domestic market, but different opportunities to
generate returns on these assets in foreign markets. In this case, currency movements may affect
relative valuations of different assets. While domestic and foreign firms pay in the same
currency, the firm-specific assets may generate returns in different currencies. The relative level
of foreign firm acquisitions of these assets may be affected by exchange rate movements. In the
simple stylized example, if a representative foreign firm and domestic firm bid for a foreign
target firm with firm-specific assets, real exchange rate depreciations of the foreign currency can
plausibly increase domestic acquisitions of these target firms. Again, this channel predicts that
foreign currency depreciation will lead to enhanced FDI into the foreign economy. Data on
Japanese acquisitions in the United States support the hypothesis that real dollar depreciations
make Japanese acquisitions more likely in U.S. industries with firm-specific assets.
4. In addition to these arguments supporting the effects of levels of exchange rates,
volatility of exchange rates also matters for FDI activity. Theoretical arguments for volatility
effects are broadly divided into “production flexibility” arguments and “risk aversion”
arguments. To understand the production flexibility arguments, consider the implications of
having a production structure whereby producers need to commit investment capital to domestic
and foreign capacity before they know the exact production costs and exact amounts of goods to
be ordered from them in the future. When exchange rates and demand conditions are realized,
the producer commits to actual levels of employment and the location of production. As
Aizenman (1992) nicely demonstrated, the extent to which exchange rate variability influences
foreign investment hinges on the sunk costs in capacity (i.e. the extent of investment
irreversibilities), on the competitive structure of the industry, and overall on the convexity of the
profit function in prices. In the production flexibility arguments, the important presumption is
that producers can adjust their use of a variable factor following the realization of a stochastic
input into profits. Without this variable factor, i.e. under a productive structure with fixed instead
of variable factors, the potentially desirable effects on profits of price variability are diminished.
By the production flexibility arguments, more volatility is associated with more FDI ex ante, and
more potential for excess capacity and production shifting ex post, after exchange rates are
observed.
An alternative approach linking exchange-rate variability and investment relies on risk
aversion arguments. The logic is that investors require compensation for risks that exchange rate
movements introduce additional risk into the returns on investment. Higher exchange-rate
variability lowers the certainty equivalent expected exchange-rate level, as in Cushman (1985,
1988). Since certainty equivalent levels are used in the expected profit functions of firms that
5. make investment decisions today in order to realize profits in future periods. If exchange rates
are highly volatile, the expected values of investment projects are reduced, and FDI is reduced
accordingly. These two arguments, based on “production flexibility” versus “risk aversion”,
provide different directional predictions of exchange rate volatility implications for FDI.
The argument that producers engage in international investment diversification in order
to achieve ex post production flexibility and higher profits in response to shocks is relevant to the
extent that ex post production flexibility is possible within the window of time before the
realization of the shocks. This suggests that the production flexibility argument is less likely to
pertain to short term volatility in exchange rates than to realignments over longer intervals.
When considering the existence and form of real effects of exchange rate variability, a
clear distinction must be made between short term exchange rate volatility and longer term
misalignments of exchange rates. For sufficiently short horizons, ex ante commitments to
capacity and to related factor costs are a more realistic assumption than introducing a model
based on ex post variable factors of production. Hence, risk aversion arguments are more
convincing than the production flexibility arguments posed in relation to the effects of short-term
exchange rate variability. For variability assessed over longer time horizons, the production
flexibility motive provides a more compelling rationale for linking foreign direct investment
flows to the variability of exchange rates.
As exposited above, the exchange rate effects on FDI are viewed as exogenous,
unanticipated, and independent shocks to economic activity. Of course, to the extent that
exchange rates are best described as a random walk, this is a reasonable treatment. Otherwise, it
is inappropriate to take such an extreme partial equilibrium view of the world. Accounting for
the co-movements between exchange rates and monetary, demand, and productivity realizations
6. of countries is important. As Goldberg and Kolstad (1995) show, these correlations can modify
the anticipated effects on expected profits, and the full presumption of profits as decreasing in
exchange rate variability. Empirically, exchange rate volatility tends to increase the share of a
country’s productive capacity that is located abroad. Analysis of two-way bilateral foreign direct
investment flows between the United States, Canada, Japan, and the United Kingdom showed
that exchange rate volatility tended to stimulate the share of investment activity located on
foreign soil. For these countries and the time period explored, exchange rate volatility did not
have statistically different effects on investment shares when distinguished between periods
where real or monetary shocks dominated exchange rate activity. Real depreciations of the
source country currency were associated with reduced investment shares to foreign markets, but
these results generally were statistically insignificant.
Although theoretical arguments conclude that the share of total investment located abroad
may rise as exchange rate volatility increases, this does not imply that exchange rate volatility
depresses domestic investment activity. In order to conclude that domestic aggregate investment
declines, one must show that the increase in domestic outflows is not offset by a rise in foreign
inflows. In the aggregate United States economy, exchange rate volatility has not had a large
contractionary effect on overall investment (Goldberg 1993).
Overall, the current state of knowledge is that exchange rate volatility can contribute to
the internationalization of production activity without depressing economic activity in the home
market. The actual movements of exchange rates can also influence FDI through relative wage
channels, relative wealth channels, and imperfect capital market arguments.
7. Aizenman, J. "Exchange Rate Flexibility, Volatility and Patterns of Domestic and Foreign Direct
Investment," International Monetary Fund Staff Papers vol.39 no. 4 (1992) 890-922.
Blonigen, Bruce. “Firm-Specific Assets and the Link Between Exchange Rates and Foreign
Direct Investment.” The American Economic Review, Vol. 87, No. 3. (Jun.1997), pp.
447-465.
Cushman, D.O., "Real Exchange Rate Risk, Expectations, and the Level of Direct Investment,"
Review of Economics and Statistics vol.67 no. 2 (1985) 297-308.
Cushman, D.O., "Exchange Rate Uncertainty and Foreign Direct Investment in the United
States" Weltwirtschaftliches Archiv 124:2 (1988) 322-334.
Froot, K., and J. Stein, "Exchange Rates and Foreign Direct Investment: An Imperfect Capital
Markets Approach", Quarterly Journal of Economics (1991) 1191-1217.
Goldberg, L., "Exchange Rates and Investment in United States Industry", Review of Economics
and Statistics vol. 75 no.4 (1993) 575-588.
Goldberg, Linda & Charles Kolstad. “Foreign Direct Investment, Exchange Rate Variability and
Demand Uncertainty.” International Economic Review, vol. 36 no. 4, (November 1005)
pp. 855-73.
Klein, M. and E. Rosengren , "The Real Exchange Rate and Foreign Direct Investment in the
United States: Relative Wealth vs. Relative Wage Effects," Journal of International
Economics vol.36 (1994) 373-389.