The impact of a federal budget deficit on interest rates and the trade balance is that it can bring about the inflow of foreign financial capital as well as a better exchange rate.
<h3>How can budget deficit have effect on trade balance?</h3>
When there is a stronger exchange rate there will be a little bit difficult for all the exporters that want to sell their goods to foreign countries, and at this time the imports will become cheaper.
In this case, trade deficit will definitely bring about an inflow of foreign financial capital as well as a good exchange rate.
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The searching companies can work for equity or debt loans in order to raise money on global capital markets. The debt of a foreign institution, lender, and other debt suppliers is also an option to raise money in the capital market. As equity loans include the sale of equity to investors, the issue of bonds is part of debt loans. Capital costs are usually less than in the domestic market and the company can even borrow money from the bank. And enterprises need to be very careful to take into account the risk of adverse exchange rates because, if the peso is to be depreciated, they should be aware of the cost of acquiring the currency needed to repay a foreign exchange loan.
Moreover, foreign equity, floating foreign or Eurobonds offerings, or borrowing on the Euro currency markets may be considered by the Mexican firm. The euro currency market would then certainly provide the company with additional funding at a lower rate domestically. And if the peso decreases in the next 2 years, the company has to repay the credit in a different currency unless the company can use the future market. The value of euro currency loans would definitely be reduced.
We can recognize that the use of both foreign and euro bonds has the same disadvantages as the bonds have to be repaid in an anti-peso currency. The international bond market has important points that are worth considering, given the fewer regulations, disclosure requirements, and fiscal implications if the currency risk can be properly analyzed and minimized. Since the foreign equity market requires no payment to its stockholders and also has the greatest independence from its actions, it is perhaps the most attractive for the company. So, if the hesitations are to be overcome, investors will likely have loan strong growth prospects.
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Answer:
Reorder point = (weekly demand * lead time) + (Z * standard deviation * √lead time) = (294 * 10) + (2.326 * 90 * √10) = 2,940 + 661.99 = 3,602 units
Old safety stock = Z * standard deviation * √lead time = 662 units
new safety stock = 331
331 = Z * 90 * √10
Z = 331 / 284.60 = 1.163
Using Normal distribution function, the new confidence interval is 87.76%
Answer:
Explanation:
cost of making in-house
Variable cost = 1.95 * 65,000 = 126,750
Related fixed cost = 75,000
Unavoidable fixed cost= 62,000
Total cost of manufacturing = 263,750.
cost of buying
Unit cost = 3.25*65,000 = 211,250
Unavoidable fixed cost = 62,000
Total cost of buying = 273,250 .
Cost of buying is higher than the cost of making
Incremental cost buying = 273,250-263,250 = 9,500
<u>Recommendation</u>
Gilberto should manufacture in - house instead of buying.
