who was involved in a business of exporting Speedos ³Rollers blades´ to Thailand (answer attached)

This case study was about a company named blades incorporation who was involved in a business of exporting Speedos ³Rollers blades´ to Thailand .It was not difficult for blades Inc. to generate minimum revenue of 180,000 pairs of Speedos annually with a fixed price of THB4, 594 per pair. Blades Inc import raw material rubber & plastic of only72,000 pairs of Speedos from Thailand due to their excellent Quality & cost differentiation, remaining material for 108000 pairs are purchased from home country. The revenue generated from export to Thailand is stable however cost of goods sold keeps on changing. The company has two options o invest the revenues

-One is to enhance the production of Speedos

-Other is to invest in U.S.

Ben Holt the CFO of the Blades Inc. takes in account to invest the excessive funds either in USA at 8% interest rate or in Thailand at 15 %.( due to unstable economy).CFO asked the analyst to give reasons for denying the proposal.

Q#1

One point of concern for you is that there is a tradeoff between higher interest rates in Thailand and the delayed conversion of Baht into dollars. Explain what this means?

Q#2

If the net Baht received from the Thailand operations are invested in Thailand, how will US operations be affected? (Assume that Blades is currently paying 10% on dollar borrowed and needs more financing for its firm)

Q# 3

Compare the cash flows resulting from 2 plans. For this assume that all baht denominated cash flows are due today