Suppose the company is a multinational firm with sales in the United States and inputs purchased in Japan. How should this affect its financing choice?
Di Giorgio International, a subsidiary of California-based Di Giorgio Corporation, processes fruit juices and packages condiments in Turnhout, Belgium. It buys Brazilian orange concentrate in dollars, British apples in pounds, Italian peaches in euros, and cartons in Danish kroner. At the same time, it exports 85% of its production. Assess Di Giorgio International’s currency risk and determine how it can structure its financing to reduce this risk.
9. A U.S. company needs to borrow $100 million for a period of seven years. It can issue dollar debt at 7% or yen debt at 3%.
a. Suppose the company is a multinational firm with sales in the United States and inputs purchased in Japan. How should this affect its financing choice?