Tektronix, Inc. (TEK) is an MNE based in Beaverton, Oregon. Tek’s sales in the fiscal year...

Tektronix, Inc. (TEK) is an MNE based in Beaverton, Oregon. Tek’s sales in the fiscal year ending May 31, 2006 were about $1 billion. Its main products are scientific measuring instruments such as protocol analyses and simulators, network monitoring systems, transmission and cable test products, and a broad range of oscilloscopes. Part of the foreign sales were direct exports from Tek’s Beaverton manufacturing and research facility. A second part of sales were passed through Tek’s own foreign sales and assembly subsidiaries. A third part of sales were through joint ventures such as in Japan (Sony) and China. Tek also imported components and other materials that were used in the manufacturing operations in Beaverton. Tek’s main competitors are Agilent (formerly HP’s measuring instruments business) and Siemens (a very large German conglomerate).

Tek wishes to hedge a €4,000,000 account receivable arising from a sale to Olivetti (Italy). Payment is due in three months. Tek’s Italian unit has obtained information about local currency borrowing and Citibank has offered Tek the other quotes:

Spot rate:		$1.2000/€
Three-month forward rate:		$1.2180/€
Three-month put option on euros at strike price of $1.0800/€:		3.40% premium
Tek’s weighted average cost of capital:		9.80% p.a.
90-day dollar investment (deposit) rate:	4.00% p.a.
90-day euro investment (deposit) rate:	4.40% p.a.
90-day dollar borrowing rate:	5.60% p.a.
90-day euro borrowing rate:	6.40% p.a.

Which alternative should Tek choose if it prefers to play it safe? Which alternative should Tek choose if it is willing to take a reasonable risk and has a directional view that the euro may be appreciating vs. the dollar during the next three months? Please use Excel to show the dollar revenue 3 months later. Please explain what TEK needs to do in each hedge and what the best decision is.

Expert Solution

jeff jeffy answered 2 years ago

You are a manager of Nike based on Beaverton, Oregon. The CEO has decided to open...

You are a manager of Nike based on Beaverton, Oregon. The CEO has decided to open a new shop in Chile for first time and would like to send you up there as new manager. Discuss the implications of the global monetary system we learned in class on your work in Chile. 200 words

FootCovers, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic...

FootCovers, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions. a. Purchased additional buildings for $182 and equipment for $270; paid $408 in cash and signed a long-term note for the rest. b. Issued 110 shares of $2 par value common stock for $335 cash. c. Declared $145 in dividends to be paid in the following...

Nike, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic...

Nike, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions, except for par value. Purchased additional buildings for $303 and equipment for $1,202; paid $432 in cash and signed a long-term note for the rest. Issued 10 shares of $1 par value common stock for $695 cash. Declared $1,159 in dividends to be paid in the...

Nike was founded in 1964 by Bill Bowerman and Phil Knight in Beaverton, Oregon. It began...

Nike was founded in 1964 by Bill Bowerman and Phil Knight in Beaverton, Oregon. It began as Blue Ribbon Sports (BRS). In 1972, BRS introduced a new brand of athletic footwear called Nike, named for the Greek winged goddess of victory. The company employs 26,000 staff around the world with revenues in fiscal year 2005 of $13.7 billion. It has facilities in Oregon, Tennessee, North Carolina, and the Netherlands with more than 200 factory stores, a dozen Nike women stores,...

Mini Case: Nike and Sweatshop Labor Nike, a company headquartered in Beaverton, Oregon, is a major...

Mini Case: Nike and Sweatshop Labor Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and fashion industry, with annual sales exceeding $ 30 billions, more than half of which now come from outside the United States. The company was co-founded in 1964 by Phil Knight, a CPA at Price Waterhouse, and Bill Bowerman, college track coach, each investing $ 500 to start. The company, initially called Blue Ribbon Sports, changed its name to...

a) Northwest Inc. operates manufacturing facilities in Portland Oregon and Vancouver, Canada. In the current year,...

a) Northwest Inc. operates manufacturing facilities in Portland Oregon and Vancouver, Canada. In the current year, the Portland plant generated $3.1 million net domestic taxable income and the Vancouver plant generated $4.8 million net foreign taxable income. The Vancouver plant is not held through a Canadian subsidiary. What is Northwest's current year taxable income? b) In the example above, how much U.S. tax could Northwest save in the current year if it held its Vancouver plant through a Canadian subsidiary?...

The following are the sales forecast of Avril Furniture Company for the upcoming fiscal year: Year...

The following are the sales forecast of Avril Furniture Company for the upcoming fiscal year: Year 2 Year 3 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Budgeted unit sales 10,000 16,000 15,000 23,000 30,000 Past experience has shown that the ending inventory for each quarter should be equal to 10% of the next quarter’s sales in units. The company expect to start the first quarter with 4,000 units. Two pounds of material A are required for each...

Break-Even Sales and Cost-Volume-Profit Graph Last year, Ridgecrest Inc. had sales of $3,739,680, based on a...

Break-Even Sales and Cost-Volume-Profit Graph Last year, Ridgecrest Inc. had sales of $3,739,680, based on a unit selling price of $420. The variable cost per unit was $290, and fixed costs were $826,800. The maximum sales within Ridgecrest Inc.'s relevant range are 16,000 units. Ridgecrest Inc. is considering a proposal to spend an additional $165,100 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Instructions: 1. Construct a cost-volume-profit graph on your...

Break-Even Sales and Cost-Volume-Profit Chart Last year, Hever Inc. had sales of $264,000, based on a...

Break-Even Sales and Cost-Volume-Profit Chart Last year, Hever Inc. had sales of $264,000, based on a unit selling price of $120. The variable cost per unit was $90, and fixed costs were $45,900. The maximum sales within Hever's relevant range are 2,800 units. Hever Inc. is considering a proposal to spend an additional $12,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Required: 1. Construct a cost-volume-profit chart on your own...

Break-Even Sales and Cost-Volume-Profit Graph Last year, Ridgecrest Inc. had sales of $4,527,600, based on a...

Break-Even Sales and Cost-Volume-Profit Graph Last year, Ridgecrest Inc. had sales of $4,527,600, based on a unit selling price of $440. The variable cost per unit was $250, and fixed costswere $1,396,500. The maximum sales within Ridgecrest Inc.'s relevant range are 18,000 units. Ridgecrest Inc. is considering a proposal to spend an additional $279,300 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Instructions: 1. Construct a cost-volume-profit graph on your own...

Question