Question

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. Perform multilateral netting by filling up the table below. If the transaction cost is 2%, how much the company need to pay (in BND) if they decided to do multilateral netting?

RECEIVING	PAYING SUBSIDIARY (BND in millions)
SUBSIDIARY (BND in millions)	Brunei	Malaysia	United Kingdom	Switzerland	Total receipt	Total Receipt/ (payment)
Brunei
Malaysia
United Kingdom
Switzerland
Brunei

Transaction cost in BND with multilateral netting:                                    

Answer 1

	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%)