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Financial Analysis of Carrefour S A

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Sikhumbuzo Bhengu, junior financial analyst ordered a&nbsp.report which was demanded by Carrefour S.A.’s CFO Barry Strydom. The request of this report is to identify the cost-effective currency in which the issuing of the bond from the firm to that currency denominated, and it turns that foreign currency is effective than the hedging strategy required to hedge exchange rate risk.
Nevertheless, investing in the British pound had several reasons why it was a good idea. Due to the high inflation rate in U.K, the real interest rate became lower while the nominal interest rate of the Swiss franc got lower than that of the British pound.
The data information provided by Carrefour S.A. was used to solve the report which was not being expanded beyond the scope of the information given. The position of Carrefour in the market was not conducted by research provided by the internet. The information provided by the case study is assumed to be true and accurate. This report has been conducted by the use of interest rate parity which is the main underlying theory in this case.
Carrefour S.A. was seeking to contribute EURO 750million debt financing by issuing a bond at a lower cost either by the use of domestic currency or foreign currency denomination bond in the Eurobond market in the summer of 2002. Carrefour S.A.’s investment banks (Morgan Stanley and UBS Warburg) not only suggested the provision of funds at the lowest cost but also anticipated that the Carrefour 10-year bonds can be dispensed at 5.25% in Euros, 5.375% in British pounds, 3.625% in Swiss francs, and 5.5% in U.S. dollars in August 2002. The assumption was that the bonds were to be issued at par.
The action plan which was taken was based on the sales, profits, and sources of profits in various currencies.&nbsp.