1. International Joint Venture Anheuser-Busch (which is now part of AB InBev due to a merger), the producer of Budweiser and other beers, has engaged in a joint venture with Kirin Brewery, the largest brewery in Japan. The joint venture enabled Anheuser-Busch to have its beer distributed through Kirin's distribution channels in Japan. In addition, it could utilize Kirin's facilities to produce beer that would be sold locally. In return, Anheuser-Busch provided information about the American beer market to Kirin.

a. Explain how the joint venture enabled Anheuser-Busch to achieve its objective of maximizing shareholder wealth.

b. Explain how the joint venture limited the risk of the international business.

c. Many international joint ventures are intended to circumvent barriers that normally prevent foreign competition. What barrier in Japan did Anheuser-Busch circumvent as a result of the joint venture? What barrier in the United States did Kirin circumvent as a result of the joint venture?

d. Explain how Anheuser-Busch could have lost some of its market share in countries outside Japan as a result of this particular joint venture.

2. Valuation of Walmart's International Business In addition to all of its stores in the United States, Walmart Stores, Inc. has 13 stores in Argentina, 302 stores in Brazil, 289 stores in Canada, 73 stores in China, 889 stores in Mexico, and 335 stores in the United Kingdom. Overall, it has 2,750 stores in foreign countries. Consider that the value of Walmart is composed of two parts, a U.S. part (due to business in the United States) and a non-U.S. part (due to business in other countries). Explain how to determine the present value (in dollars) of the non-U.S. part assuming that you had access to all the details of Walmart businesses outside the United States.

3. Impact of International Business on Cash Flows and Risk Nantucket Travel Agency specializes in tours for American tourists. Until recently, all of its business was in the United States. It just established a subsidiary in Athens, Greece, which provides tour services in the Greek islands for American tourists. It rented a shop near the port of Athens. It also hired residents of Athens who could speak English and provide tours of the Greek islands. The subsidiary's main costs are rent and salaries for its employees and the lease of a few large boats in Athens that it uses for tours. American tourists pay for the entire tour in dollars at Nantucket's main U.S. office before they depart for Greece.

a. Explain why Nantucket may be able to effectively capitalize on international opportunities such as the Greek island tours.

b. Nantucket is privately owned by owners who reside in the United States and work in the main office. Explain possible agency problems associated with the creation of a subsidiary in Athens, Greece. How can Nantucket attempt to reduce these agency costs?

c. Greece's cost of labor and rent are relatively low. Explain why this information is relevant to Nantucket's decision to establish a tour business in Greece.

d. Explain how the cash flow situation of the Greek tour business exposes Nantucket to exchange rate risk. Is Nantucket favorably or unfavorably affected when the euro (Greece's currency) appreciates against the dollar? Explain.

e. Nantucket plans to finance its Greek tour business. Its subsidiary could obtain loans in euros from a bank in Greece to cover its rent, and its main office could pay off the loans over time. Alternatively, its main office could borrow dollars and would periodically convert dollars to euros to pay the expenses in Greece. Does either type of loan reduce the exposure of Nantucket to exchange rate risk? Explain.

f. Explain how the Greek island tour business could expose Nantucket to political country risk.

4. Exposure of MNCs to Exchange Rate Movements Arlington Co. expects to receive 10 million euros in each of the next 10 years. It will need to obtain 2 million Mexican pesos in each of the next 10 years. The euro exchange rate is presently valued at $1.38 and is expected to depreciate by 2 percent each year over time. The peso is valued at $.13 and is expected to depreciate by 2 percent each year over time. Review the valuation equation for an MNC. Do you think that the exchange rate movements will have a favorable or unfavorable effect on the MNC?