Country and Company Analysis

Country and Company Analysis

(Vale from Brazil)

Purpose:

To assess your ability to:

  • Determine the reporting currency of a non-US public firm.
  • Explain the concept of the time value of money and the principle of compound growth.
  • Analyze and conclude investment in the equity (stock) or debt (bonds) of the company denominated in the foreign currency.

Action Items:

  1. Determine the reporting currency of the Brazilian company Vale (other than the U.S. dollar) in which, its financial statements and other financial reports are expressed. Then, complete the following table for that currency in terms of the U.S. dollar either in American terms (number of U.S. dollars per one unit of the foreign currency) or in European terms (number of foreign currency units per one U.S. dollar). Please be consistent in how your express the exchange rates. Sources for this information include:
Currency Today’s Date Spot Rate One Year ago Spot Rate Today
$
  1. Assume you are a U.S.-based investor with USD 1000 to invest and answer the questions below:
    1. If you had converted the USD 1000 into the foreign currency one year ago at the above spot rate, then how much in foreign currency would you have received?
    2. If you converted the foreign currency received one year ago back into US dollars at today’s spot rate, how many U.S. dollars would you have now?
    3. Has the foreign currency depreciated, appreciated, or not changed in value relative to the U.S. dollar over the past year?
    4. What has been the percentage change?
    5. Include your results as an attachment to the Business Brief below.
  1. For Vale (the non-US public company), consider whether you would invest in the equity (stock) or debt (bonds) of the company denominated in the foreign currency. Assume you have a one-year investment horizon and write one page analysis. Complete sentences must be used (bullets not acceptable). Your analysis must be written using a concise writing style.
  2. Your brief should answer all of the questions posed above.p(2)

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