Company Valuation of Navigation Systems Inc - 1650 Words

Company Valuation of Navigation Systems Inc (Case Study Sample) Content: INTERANTIONAL FINANCE INVESTMENTStudents NameCourse NameDate Due CASE ON NAVIGATION SYSTEM INC For the purpose of this paper, we shall use the following exchange rates for the Euro and the Chinese Yuan or RMBEURO / USD = 1.13 i.e. for à ¢ 1 = USD $ 1.13USD / Chinese Yuan = 6.378 or USD$1 = Yuan 6.378The equivalent of the Euros and the Chinese Yuan in United States dollars are then calculated as below. Operations in the United States = USD$ 300 millionOperations in Germany = EURO 100 millionOperations in Shanghai = 650 million Yuan We convert the values of operations in different countries to the United States Dollar using the spot exchange rate and have the following values of operations in the United States. Country Respective Value In The CountryOperations Value In USD$United States USD $ 300 MillionUSD $ 300 MillionGermanyEURO 100 MillionUSD $113 MillionChina RMB 650 MillionUSD $101.91 MillionIn the following table we show the value of operations together with the respective values of return on sales. We take note that the return on sales is calculated as a percentage of the total operations. We use the formula as  EMBED Equation.3 
The following table displays the total value of operations for Navigation System Inc in the United States denominated in USD$ exchanged using spot rates for the dollar in the countries where the operations were made. CountryValue of operations ROSValue of return on sales Total ValueUnited States300 Million10%30 Million330 MillionGermany113 Million12%13.56 Million126.56 MillionChina101.91 Million8%8.1528 Million110.0628 MillionTotal514.91 Million51.7126 Million566.6228 MillionIt is given that the forecast value total for the corporation in one year is expected to be USD$ 500 million. But according to the table above, the value of operations made from abroad increased because of the value of the USD$ in the foreign countries. We realize that using spot exchange rat e, the total value of revenues is USD$ 514.91 million. The value of return of sales in the United States is USD$ 51.7126 million. The total value from operations including ROS at spot exchange rate is USD$ 566.6228 million. Forward Exchange RateThe forward exchange rate or forward rate also called the forward price is a rate of exchange where a bank or an entity or business makes an agreement to exchange a particular currency for another currency but at a future date when it makes a forward contract with a given investor. This exchange rate depends on the spot exchange rate and the interest rate in the country where the value of the currencies are derived. The forward exchange rate is calculated using the formula below.  EMBED Equation.3 
Where F is the forward exchange rateS is the spot exchange rate, rd is the interest rate in the domestic market and rf is the interest rate in the foreign market. According to tradingeconomics.com (2015), the interest rates in United States ar e 0.25%, Germany is 0.05% and in china the interest rate is 4.6%. For the operations made in Germany, we can obtain the forward exchange rate as  EMBED Equation.3 
 where S = 0.88, so EMBED Equation.3 
,  EMBED Equation.3 
= 0.88176.We see that the forward rate of the Euro to the dollar is 1.1340 i.e. for one Euro there are USD$ 1.134We now find the forward rate of the Chinese RMB with the same formula. That is to say  EMBED Equation.3 
 where S = 6.378. rf = 4.6% or 0.046 EMBED Equation.3 
. The forward rate for the Chinese RMB Yuan is 6.1128.we now calculate and find the value of the operations in the United States at the forward rates. We use the following table to give a summary of the same. Country Respective Value In The CountryForward RateOperations Value In USD$United States USD $ 300 MillionN/AUSD $ 300 MillionGermanyEURO 100 Million1.134USD $113.4 MillionChina RMB 650 Million6.1128USD $106.334 MillionThe following table displays the total value of operations for Navigation System Inc in the United States denominated in USD$ exchanged Forward Exchange Rates for the dollar in the countries where the operations were madeCountryValue of operations ROSValue of return on sales Total ValueUnited States300 Million10%30 Million330 MillionGermany113.4 Million12%13.608 Million127.008 MillionChina106.334 Million8%8.50672 Million114.84072 MillionTotal519.734 Million52.11472 Million571.84872 MillionWe note from the table above that with forward exchange rate, the corporation would expect repatriate more money to the United States than when they use spot exchange rate. We use the following table to show the differences CountrySpot rate value (millions)Forward rate value (millions)Total value at spot (millions)Total value at forward (millions) United States300 300300300Germany 113113.4126.56127.008China 101.91106.334110.0628114.84072We note clearly that forward exchange ra te gives an expected higher value of the repatriations than spot exchange rates. The following are explanations of the different repatriations using spot exchange rate, forward exchange and the foreign exchange swaps. Spot TransactionsSpot transactions are transactions which occur whenever foreign exchange purchases are made (wiseGEEK, 2015). With spot transactions, the terms usually call for paying for a currency which usually is at specified rate time as well as in the currency preffered by the seller. In some of the cases, terms allow the person paying to pay for the currency in a specified period of time and many cases it is within forty eight hours following the signing of the contract. Spot transactions are also associated with transactions made in the foreign country... Company Valuation of Navigation Systems Inc - 1650 Words Company Valuation of Navigation Systems Inc (Case Study Sample) Content: INTERANTIONAL FINANCE INVESTMENTStudents NameCourse NameDate Due CASE ON NAVIGATION SYSTEM INC For the purpose of this paper, we shall use the following exchange rates for the Euro and the Chinese Yuan or RMBEURO / USD = 1.13 i.e. for à ¢ 1 = USD $ 1.13USD / Chinese Yuan = 6.378 or USD$1 = Yuan 6.378The equivalent of the Euros and the Chinese Yuan in United States dollars are then calculated as below. Operations in the United States = USD$ 300 millionOperations in Germany = EURO 100 millionOperations in Shanghai = 650 million Yuan We convert the values of operations in different countries to the United States Dollar using the spot exchange rate and have the following values of operations in the United States. Country Respective Value In The CountryOperations Value In USD$United States USD $ 300 MillionUSD $ 300 MillionGermanyEURO 100 MillionUSD $113 MillionChina RMB 650 MillionUSD $101.91 MillionIn the following table we show the value of operations together with the respective values of return on sales. We take note that the return on sales is calculated as a percentage of the total operations. We use the formula as  EMBED Equation.3 
The following table displays the total value of operations for Navigation System Inc in the United States denominated in USD$ exchanged using spot rates for the dollar in the countries where the operations were made. CountryValue of operations ROSValue of return on sales Total ValueUnited States300 Million10%30 Million330 MillionGermany113 Million12%13.56 Million126.56 MillionChina101.91 Million8%8.1528 Million110.0628 MillionTotal514.91 Million51.7126 Million566.6228 MillionIt is given that the forecast value total for the corporation in one year is expected to be USD$ 500 million. But according to the table above, the value of operations made from abroad increased because of the value of the USD$ in the foreign countries. We realize that using spot exchange rat e, the total value of revenues is USD$ 514.91 million. The value of return of sales in the United States is USD$ 51.7126 million. The total value from operations including ROS at spot exchange rate is USD$ 566.6228 million. Forward Exchange RateThe forward exchange rate or forward rate also called the forward price is a rate of exchange where a bank or an entity or business makes an agreement to exchange a particular currency for another currency but at a future date when it makes a forward contract with a given investor. This exchange rate depends on the spot exchange rate and the interest rate in the country where the value of the currencies are derived. The forward exchange rate is calculated using the formula below.  EMBED Equation.3 
Where F is the forward exchange rateS is the spot exchange rate, rd is the interest rate in the domestic market and rf is the interest rate in the foreign market. According to tradingeconomics.com (2015), the interest rates in United States ar e 0.25%, Germany is 0.05% and in china the interest rate is 4.6%. For the operations made in Germany, we can obtain the forward exchange rate as  EMBED Equation.3 
 where S = 0.88, so EMBED Equation.3 
,  EMBED Equation.3 
= 0.88176.We see that the forward rate of the Euro to the dollar is 1.1340 i.e. for one Euro there are USD$ 1.134We now find the forward rate of the Chinese RMB with the same formula. That is to say  EMBED Equation.3 
 where S = 6.378. rf = 4.6% or 0.046 EMBED Equation.3 
. The forward rate for the Chinese RMB Yuan is 6.1128.we now calculate and find the value of the operations in the United States at the forward rates. We use the following table to give a summary of the same. Country Respective Value In The CountryForward RateOperations Value In USD$United States USD $ 300 MillionN/AUSD $ 300 MillionGermanyEURO 100 Million1.134USD $113.4 MillionChina RMB 650 Million6.1128USD $106.334 MillionThe following table displays the total value of operations for Navigation System Inc in the United States denominated in USD$ exchanged Forward Exchange Rates for the dollar in the countries where the operations were madeCountryValue of operations ROSValue of return on sales Total ValueUnited States300 Million10%30 Million330 MillionGermany113.4 Million12%13.608 Million127.008 MillionChina106.334 Million8%8.50672 Million114.84072 MillionTotal519.734 Million52.11472 Million571.84872 MillionWe note from the table above that with forward exchange rate, the corporation would expect repatriate more money to the United States than when they use spot exchange rate. We use the following table to show the differences CountrySpot rate value (millions)Forward rate value (millions)Total value at spot (millions)Total value at forward (millions) United States300 300300300Germany 113113.4126.56127.008China 101.91106.334110.0628114.84072We note clearly that forward exchange ra te gives an expected higher value of the repatriations than spot exchange rates. The following are explanations of the different repatriations using spot exchange rate, forward exchange and the foreign exchange swaps. Spot TransactionsSpot transactions are transactions which occur whenever foreign exchange purchases are made (wiseGEEK, 2015). With spot transactions, the terms usually call for paying for a currency which usually is at specified rate time as well as in the currency preffered by the seller. In some of the cases, terms allow the person paying to pay for the currency in a specified period of time and many cases it is within forty eight hours following the signing of the contract. Spot transactions are also associated with transactions made in the foreign country...