Corporate Fin Mgt NDLM.PDF

Learning Unit 7

Guide for Group Activities

E. International Financial Management

This guide has been designed to enable participants to solve problems 1-15 given in the
handout on Group Activities in Learning Unit 7. The problems and solutions given in this
guide are illustrative and will enable the participant to solve the problems given in Group
Activities.

Illustration

Problem 1

You are required to find out the overall balance, showing clearly all the sub-balances
from the following data:

(1) UC Corporation of the USA invests in India Rs.3, 00,000 to modernize its

Indian Subsidiary.

(2) A tourist from Egypt buys souvenirs worth Rs.3000 to carry with him. He

also pays hotel and travel bills of Rs.5, 000 to Delhi Tourist Agency.

(3) The Indian subsidiary of UC Corporation remits, as usual, Rs.5, 000 as

dividends to its parent company in the USA.

(4) This Indian subsidiary of UC Corporation sells a part of its production in other

Asian countries for Rs.1, 00,000.

(5) The Indian subsidiary borrows a sum of Rs.2, 00,000 (to be paid back in a

year’s time) from the German money market to resolve its urgent liquidity

problem.

(6) An Indian company buys a machine for Rs.1, 00,000 from Japan and 60

percent payment is made immediately; the remaining amount is to be paid

after 3 years.

(7) An Indian subsidiary of French Company borrows Rs.50, 000 from the Indian

public to invest in its modernization programme.

Solution 1

Sources and Uses of Funds

Sl.No. Sources Uses Nature

1. 3,00,000 Direct Foreign Investment


2. (a)
   (b)

3,000

5,000

Goods exported

Services (invisible) rendered

3. 5,000 Dividends paid


4. 1,00,000 Goods exported


5. 2,00,000 Short-term borrowing


6. (a) 1,00,000 Equipment imported