Internal Factors – NBC Institute

SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

Question

Change happens continually within organisations, and the markets within which SavvyTech plc operate are not an exception. Strategic development inevitably results in some changes, which need careful management. Some of SavvyTech plc’s internal triggers of change are motivated or caused by developments within the organisation.

Required:
Review SavvyTech plc case study, identify, and explain FIVE (5) internal triggers of change with specific examples from the case.

Answer

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Tags: Internal Factors, Organizational Change, Triggers of Change
Level: Level 3

Topic: Strategy implementation
Series: JULY 2023

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

Question

One of the key considerations for multinational companies is to decide on the price at which goods and services are transferred from one member of a group to another.

Kofas Ltd has been operating in four countries: Ghana, Nigeria, UK, and USA. The parent company and the subsidiaries have decided to use a transfer pricing policy.

Required:
You have been approached as a consultant to advise on the internal and external factors that will facilitate the transfer of goods and services from one member of the group to another. (10 marks)

Answer

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Tags: External factors, Internal Factors, multinational companies, Profit Maximization, Transfer Pricing
Level: Level 3

Topic: Treasury and Advanced Risk Management Techniques
Series: MAY 2017

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

Question

JB Investments Holding Ltd (JB) is a multinational company that is committed to a policy of expansion into African countries. JB finances foreign projects with loans obtained in the currency in which project cash flows are received. JB financed an operation in Liberia with a syndicated loan of $20 million. Currently, the loan has three years to maturity. The loan requires semiannual interest payments at a fixed rate of 6.5% per annum, but JB prefers a floating interest rate as the pattern of cash flows from the Liberian project has changed.

The Finance Director talked to the creditors about JB’s preference for a floating interest rate. The creditors have agreed to accept a floating rate of LIBOR plus 200 basis points over the remaining three years of the loan term. However, the Finance Director feels that this rate is rather too high considering JB’s credit rating. She is therefore considering two alternatives for managing the interest rate risk exposure.

Alternative 1: Coupon swap with a bank
Engage in a coupon swap with UT Bank through which JB trades-in its fixed rate interest payments obligation for floating rate interest payments. The table below presents UT Bank’s bid and ask quotes for fixed dollar coupon rates:

Loan term to maturity	Bid	Ask	Treasury note (TN) rate
2 years	2-year TN rate + 30 basis points	2-year TN rate + 40 basis points	5.3%
3 years	3-year TN rate + 35 basis points	3-year TN rate + 50 basis points	5.9%
4 years	4-year TN rate + 40 basis points	4-year TN rate + 60 basis points	6.7%
5 years	5-year TN rate + 45 basis points	5-year TN rate + 70 basis points	7.8%

Floating rate quotation: Floating rates are pegged at 6-month dollar LIBOR plus 100 basis points.

Alternative 2: Coupon swap with another multinational company
Engage in a coupon swap with McEwen Ltd, a multinational company that has a floating rate dollar debt but prefers fixed coupon payments. The interest rate on McEwen’s dollar debt is LIBOR plus 150 basis points but it can borrow fixed rate dollars at 8%. Assume JB can borrow floating rate dollars at LIBOR plus 200 basis points.

Required:
(a)
i) Discuss TWO (2) advantages and TWO (2) disadvantages of hedging interest rate risk with an interest rate swap. (4 marks)
ii) Based on the restructuring deal with the creditors and the two interest rate swap alternatives, recommend a hedging strategy for interest payments on the $20 million debt. Support your recommendation with relevant computations. (10 marks)

(b) The Board of Directors of JB Investments Holdings Ltd is considering a transfer pricing policy for the transfer of goods and services among the company and its foreign subsidiaries.
Required:
Explain THREE (3) internal factors (motivations) for transfer pricing, which the board should consider in formulating a transfer pricing policy for the company. (6 marks)
(Total = 20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Interest Rate Swap, Internal Factors, Motivation, Risk Hedging, Transfer Pricing
Level: Level 3

Topic: The use of financial derivatives to hedge against interest rate risk
Series: NOV 2015

SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

Question

Required:
Review SavvyTech plc case study, identify, and explain FIVE (5) internal triggers of change with specific examples from the case.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Internal Factors, Organizational Change, Triggers of Change
Level: Level 3

Topic: Strategy implementation
Series: JULY 2023

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

Question

One of the key considerations for multinational companies is to decide on the price at which goods and services are transferred from one member of a group to another.

Kofas Ltd has been operating in four countries: Ghana, Nigeria, UK, and USA. The parent company and the subsidiaries have decided to use a transfer pricing policy.

Answer

Find Related Questions by Tags, levels, etc.

Tags: External factors, Internal Factors, multinational companies, Profit Maximization, Transfer Pricing
Level: Level 3

Topic: Treasury and Advanced Risk Management Techniques
Series: MAY 2017

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

Question

Loan term to maturity	Bid	Ask	Treasury note (TN) rate
2 years	2-year TN rate + 30 basis points	2-year TN rate + 40 basis points	5.3%
3 years	3-year TN rate + 35 basis points	3-year TN rate + 50 basis points	5.9%
4 years	4-year TN rate + 40 basis points	4-year TN rate + 60 basis points	6.7%
5 years	5-year TN rate + 45 basis points	5-year TN rate + 70 basis points	7.8%

Floating rate quotation: Floating rates are pegged at 6-month dollar LIBOR plus 100 basis points.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Interest Rate Swap, Internal Factors, Motivation, Risk Hedging, Transfer Pricing
Level: Level 3

Topic: The use of financial derivatives to hedge against interest rate risk
Series: NOV 2015

Question Tag: Internal Factors

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SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

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SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

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AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

You're reporting an error for "AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques"

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

You're reporting an error for "AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk"

SCS – July 2023 – L3 – Q3a – Strategy Implementation

Identify and explain five internal triggers of change at SavvyTech plc with examples from the case study.

You're reporting an error for "SCS – July 2023 – L3 – Q3a – Strategy Implementation"

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

You're reporting an error for "AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques"

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

You're reporting an error for "AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk"

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