FINA701 International Corporate Finance Assignment 2026 | AUT New Zealand

FINA701 International Corporate Finance Assignment

Tasks:

Your group will be assigned a New Zealand company involved in international business. The report must include answers to the following questions regarding the assigned company. You must use the Workspace database to complete this assignment.

Part 1. Company introduction, foreign involvement, and strategy.

1.1 Describe the nature of the company's business.
1.2 Explain the degree of foreign involvement of the company. What percentage of sales revenues and income does the company derive from its foreign operations? What countries does the company operate in? Is the company's foreign activity increasing or decreasing? 1.3 What are the strategic motives for this company to expand overseas?
1.4 What is the company's competitive advantage in global markets?

Part 2. Foreign exchange rates.

2.1 Because the company is involved in international business, its operations and profitability are likely to be affected by the changes in the value of foreign currencies (foreign exchange exposure). 2.1.1 Which foreign currencies do you expect most relevant for the company based on the discussion in Part 1? Explain. Select six (for a 6-student group) foreign currencies relevant to the company.
2.1.2 Briefly discuss how the value of the selected foreign currencies is determined (ie., foreign exchange regime).
Perform the following analysis for the selected foreign currencies (NZ - home country):
2.2 Obtain monthly exchange rates for the foreign currencies (NZD price of foreign currency) from Workspace for the last ten years. Include a financial chart and provide summary statistics. Comment on the trends.
2.3 Calculate the percentage changes in the value of the foreign currencies in terms of the NZ dollar in the last 12 months (Home country - New Zealand). Comment on the numbers obtained.
2.4 Using data from question 2.2, calculate foreign exchange monthly returns. Report summary statistics and comment on the numbers obtained.
2.5 Calculate foreign exchange volatility as the standard deviation of monthly foreign exchange returns (calculated in 2.4). Compare and comment on the numbers obtained.
2.6 Obtain the latest spot quotes for foreign currencies from Workspace and calculate bid-ask spreads. Include the data snapshots from Workspace. Compare and comment on the numbers obtained.
2.7 For the foreign currencies, obtain from Workspace the latest spot rates and 1-month, 6- month, and 1-year forward rates in terms of the NZ dollar (NZD price of foreign currency). If forward rates in the NZ dollar are unavailable, obtain forward rates in USD (USD price of foreign currency) and then calculate forward cross-rates for the foreign currencies in terms of the NZ dollar (NZD price of foreign currency).
Calculate mid-rates using bid and ask rates for 1-month, 6-month, and 1-year forward rates.

Using mid-rates, calculate 1-month, 6-month, and 1-year forward premium/ discount for the foreign currencies relative to the NZ dollar (New Zealand - home country).

Include the snapshots of data from Workspace.

Interpret the obtained numbers and comment on the market expectations about the value of the foreign currencies in the coming year.

Part 3. Foreign exchange exposure

3.1 What are the expected effects of the value of the NZ dollar on the company's operations and profitability, given the nature of the company's business? (i.e., positive/negative effects of a strong/weak NZ dollar).
3.2 Estimating foreign exchange exposure of the company.
A company's foreign exchange exposure can be estimated as the relationship between the company's returns and the foreign exchange returns (see He and Ng, 1998; Dominguez and Tesar, 2006).

Estimate: (1) the total company's foreign exchange exposure and (2) the company's foreign exchange exposure relative to the market.
(1) Total foreign exchange exposure is measured as the value of estimated from the following regression:
where re is the stock return of company i at time t; is the foreign exchange return at time
t. Coefficient stock returns.
measures the unconditional relationship of the foreign exchange and
(2) Foreign exchange exposure relative to the market is measured as the value of Bix estimated from the following regression:
where r is the stock return of company i at time t, rat is the return on market portfolio at time t; 7x is the foreign exchange return at time t. Coefficient ßix measures the relationship between foreign exchange and stock returns after controlling for market return.
Steps:
-
Obtain from Workspace monthly stock prices and calculate monthly logarithmic
returns:
-1
Obtain monthly market index (NZX50) prices and calculate monthly logarithmic market returns as above.
Use monthly foreign exchange rates data from question 2.2 to calculate monthly logarithmic foreign exchange returns:
피로피로,
MM-1
) - In(1)