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In: Finance

Cemerlang Inc. is a conglomerate company which has four subsidiaries located in Brunei, Malaysia, United Kingdom,...

Cemerlang Inc. is a conglomerate company which has four subsidiaries located in Brunei, Malaysia, United Kingdom, and Switzerland. The exchange rates available for the company are MYR2.9000/BND, GBP0.4000/BND and BND1.2500/CHF. The following is the inter- subsidiary payments matrix for Cemerlang Inc in multiple currency.

RECEIVING

PAYING SUBSIDIARY (in millions)

SUBSIDIARY

(in millions)

Brunei

Malaysia

United Kingdom

Switzerland

Brunei

MYR58

GBP10

CHF12.5

Malaysia

BND10

GBP12

CHF16.25

United Kingdom

BND 20

MYR29

CHF 20

Switzerland

BND15

MYR43.5

GBP6
  1. Convert all the cash flows into Brunei Dollar (BND) and fill in the table cells below to show the intersubsidiary payments matrix for Cemerlang Group. If the transaction cost is 2%, how much the company need to pay (in BND) if they decided not to do any netting? (7marks)

    RECEIVING SUBSIDIARY

    (BND in

    millions)

    PAYING SUBSIDIARY (BND in millions)

    Brunei

    Malaysia

    United Kingdom

    Switzerland

    Brunei

    Malaysia

    10

    United

    Kingdom

    20

    Switzerland

    15

    Transaction cost in BND with no netting:                                    

Solutions

Expert Solution

RECEIVING SUBSIDIARY:BRUENI
A Calculation
Paying Subsidiary Amount in BND
Malayasia 20 (58/2.9000)
United Kingdom 25 (10/0.4000)
Switzerland 15.625 (12.5*1.2500)
RECEIVING SUBSIDIARY:MALAYASIA
Paying Subsidiary Amount in BND Calculation
United Kingdom 30 (12/0.4000)
Switzerland 20.3125 (16.25*1.25)
RECEIVING SUBSIDIARY:UNITED KINGDOM
Paying Subsidiary Amount in BND Calculation
Malayasia 10 (29/2.9000)
Switzerland 25 (20*1.25)
RECEIVING SUBSIDIARY:SWITZERLAND
Paying Subsidiary Amount in BND Calculation
Malayasia 15 (43.5/2.9000)
United Kingdom 15 (6/0.4)
PAYING SUBSIDIARY
RECEIVING SUBSIDIARY Brunei Malayasia United Kingdom Switzerland TOTAL
Brunei X 20 25 15.625 60.625
Malayasia 10 X 30 20.3125 60.3125
United Kingdom 20 10 X 25 55
Switzerland 15 15 15 X 45
TOTAL 45 45 70 60.9375 220.9375
Company need to pay transaction cost 4.41875 MillionBND (220.9375*2%)

jeff jeffy answered 1 year ago
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