International business Essay Example | Topics and Well Written Essays - 1250 words - 3

International business - Essay Example For the purposes of this essay, I intend to open up a logging business in Brazil. I will need to present a lot of information about the Brazilian economy and the logging industry in order to feel comfortable that my investment in Brazil will return dividends, be sustainable, and jump through the various legal and regulatory hoops. Brazil is by far the largest country in South America, both in geographical size and in population. It is nearly half of all of South America, with very diverse physical characteristics, and a population of nearly 200 million. It is a democracy, but it is a young democracy, with institutions that are still developing and are still slightly vulnerable. The main language is Portuguese (not Spanish) and there are colonial ties to Portugal. The population is very diverse, with native people mixed with African people, mixed with European peoples. The political system is similar to that in the United States. The President is elected and is head of government and head of state and appoints his cabinet. The current President Luiz Inà ¡cio Lula da Silva is a leftist, but he is also friendly to business. He has so far overseen a great deal of economic growth in the new millennium and also additional labour and environmental protections. The legal system in Brazil is based on civil law. The system is not very efficient and this is something to take into account when starting a business in Brazil. It can take years to resolve suits and enforce contracts. The tax system is also very difficult to navigate. According to one study it takes the typical Brazilian company 2,600 hours a year to comply with the tax code.1 These are important disincentives to investing in Brazil. I will have to spend extra money to find good accountants and lawyers to help me out. Starting a business is not always easy in Brazil, even if it is getting easier. A recent

Finance problems Speech or Presentation Example | Topics and Well Written Essays - 2000 words

Finance problems - Speech or Presentation Example What is the component cost of debt for use in the WACC calculation? Tapley Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) Tapleys bonds mature in 25 years, have a 7.5% annual coupon, a par value of $1,000, and a market price of $936.49. (2) The company’s tax rate is 40%. (3) The risk-free rate is 6.0%, the market risk premium is 5.0%, and the stock’s beta is 1.5. (4) The target capital structure consists of 30% debt and 70% equity. Tapley uses the CAPM to estimate the cost of equity, and it does not expect to have to issue any new common stock. What is its WACC? Wagner Inc estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept? The Nunnally Company has equal amounts of low-risk, average-risk, and high-risk projects. Nunnally estimates that its overall WACC is 12%. The CFO believes that this is the correct WACC for the company’s average-risk projects, but that a lower rate should be used for lower risk projects and a higher rate for higher risk projects. However, the CEO argues that, even though the company’s projects have different risks, the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources. If the CEO’s opinion is followed, what is likely to happen over time? Since according to the CEO’s opinion all projects, whether risky or non-risky, should be evaluated by using the average WACC therefore the riskier project’s cash flows would be discounted by using a lower WACC as a result the firm will accept too many risky projects. Similarly, low risk project’s cash flows would be discounted by using a higher WACC which will reject too many low-risk projects. Percy Motors has a target capital