Finance Case

. Evaluate the operating and transaction exposure that BMW faces Veysi

http://pure.au.dk/portal-asb-student/files/10730/Valuation_of_BMW.pdf

2. Should the company hedge the dollar exposure? Why or why not? To what

extent? Christian

3. What are the methods available for hedging this exposure? Arndt

4. What are the costs and benefits of each Josef

5. Discuss methods used by the company and to what extent they should be used Paulina

BMW's hedging exposure strategy has been natural hedging, that means, trying to match to the extent possible the currency of its operating revenues to that of its operating expenses. The central office in Munich issued guidelines, instructions and consolidated risk figures globally while local treasury centers provided operational risk management.

6. Estimate the impact of the $ per pound rate on the company profits in the

following years All together

Question 2: Should the company hedge the dollar exposure? Why or why not? To what extent?

AES

Objectives

To examine country risk, cost of capital, valuation, emerging markets, and capital

budgeting

Questions

1. How would you evaluate the capital budgeting method used historically by AES?

What's good and bad about it? Veysi

2. If Venerus implements the suggested methodology, what would be the range of

discount rates that AES would use around the world? Arndt

3. Does this make sense as a way to do capital budgeting? Christian

4. What is the value of the Pakistan project using the cost of capital derived from the

new methodology? If this project was located in the U.S., what would its value

be? José

Scenario 1: Pakistan

In order to calculate the value of project for the Lal Pir project in Pakistan, we first need to calculate the Weighted Average Cost of Capital (WACC) using the new proposed methodology.The value of the levered β comes out to be 0.3852 or 38.52%, which essentially means that our project is not very highly correlated to the market return. Using this value of β we now calculate the cost