Direct Foreign Investment Decision ProposalStar Jeans Company has been weighing the option to enter into foreign territory to do business. There are several factors that have played a part in this decision; one that has taken over 3 weeks to conclude. After careful examination and close analysis, the financial team at Star Jeans Company has devised the optimal financial and investment strategy for entry into Brazil. Team B will present this strategy and discuss a range of analysis to support that decision, ranging from foreign exchange rate to a contingency plan.
Reasons for Choosing BrazilOne of the most important questions that one would ask is why invest in Brazil? One major reason is a cultural difference that will provide a fresh voice on the product, and display what Star Jeans Company is capable of, worldwide. An even more prominent reason is the financial advantage that a United States based company would have over keeping their business domestic.
English: Foreign direct investment, net inflows, I...
English: Foreign direct investment incoming in Jor...
English: Graphics depicting foreign direct investm...The exchange rate of a Brazilian real to a U.S. dollar is 1:.567537. This exchange rate makes possible the production of fewer products for more money because the exchange rate is close to 2:1 in favor of the domestic dollar. "As a country and emerging economy, Brazil remains a very attractive market for foreign investment receiving 3% of the total global foreign direct investment in 2004, representing the largest allocation in the last six years" (Alvez, 2007, 3). This fact makes evident that Brazil is an up and coming economy and is therefore a wise choice for Star Jeans Company.
Foreign Exchange Rate DataAs referenced above, the exchange rate of the Brazilian real to the U.S. dollar is 1:.5674537. What this allows a U.S. based company to do, is fund many different sources of raising capital.
Appropriate Capital SourcesSensitivity AnalysisIf Funds are BlockedStar...