Vanguard Security Corporation (VSC): International Transaction Dilemma
The write-up of the case should be typewritten only.
This is a real-life business case and it requires your comprehensive analysis, including basic accounting, international finance, strategic business decision-making and common business sense. Remember, this is finance class, numbers and finance logic is what is important, so ANYTHING THAT YOU SUGGEST MUST BE FINANCIALLY (numerically) SUBSTATNTIATED.
There are no wrong or right answers. I will grade your papers based on understanding of the situation, depth and quality of analysis, ability to apply what you learned in the class to a real life case, originality of thought, logical business reasoning and ability to express yourself concisely and succinctly. This is a business presentation so any belaboring the point will result in grading down.
The following is the list of questions for the case:
1. Use the relevant data provided in the case to develop the forecast for the US dollar as of April 1st for the year ahead. Utilize your acquired knowledge of exchange rates forecasting to substantiate your numbers. Explain how what data and technique(s)you usedto arrive at this forecast?
2. Read and review the history, business model and all financial statements of the company and provide financial analysis of VSC. How strong is their financial position, and what do they need to successfully carry out the project?
3. A) Was Peter's use of the spot rate on April 1st for the determination of the bid in US dollars correct? Provide a well reasoned argument for why or why not. If yes what is the best way to secure the expected revenue? If not, what should they have used for the exchange rate in the bid?
4. Based on your analysis of the bid, what is the real mark up on the bid? (Hint: this has nothing to do with the exchange rate, but everything to do with the cost accounting!)
5. Analyze each of the available hedging alternatives financially and strategically. Make your recommendation for either hedging or not, and, if hedging, recommend the best hedging alternative. Base your recommendation on the financial analysis of various alternatives in the case, financial analysis of the company, and projection of exchange rates.