The firm manufactures a global positioning system (GPS) thatsells for $2,000, with cost of goods sold (hardware 30% andsoftware 70%) of 55% of sales. Compared to the United States, Chinaoffers a 7% cost reduction in electronics manufacturing hardwareand a 45% reduction in software programming. India offers a 32%reduction in software programming costs. So far, you have beenunable to determine whether India has the facilities to undertakethe hardware manufacturing. The firm has to invest $300 million. Asfar as China is concerned, you can send hardware and softwaremanufacturing to China or India.
Explore the expected GDP growth of each country and theforecast exchange rates to the U.S. dollar. Based on the forecastexchange rate with the U.S. dollar in 1 and 2 years, should the$300 million investments be paid for immediately, hedged, or paid50% ($150 million) in 1 year and 50% in 2 years?What are your recommendations on choice ofcountry?How can your firm arrange the business to be mostprofitable?(Photos show the work I have but I am not sure about howit should be invested and why? )Assume the following:Using the current spot rate for the yuan exchange rate,the 12 -month forward rate is showing a 1.5% weaker U.S. dollar,and the 24-month forward rate of exchange is showing a 2.4% weakerU.S. dollar. Using the current spot rate for the rupee exchangerate, the 12 -month forward rate is showing a 1.0% weaker U.S.dollar and the 24-month forward rate of exchange is showing a 2.0%weaker U.S. dollar.(I am having most problem with thisquestion)Below is what I have so far …
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