Sanders has to make the difficult decision of whether to sell his company for $2,000,000 to Brown and Massey. However, there are several issues raised concerning Sanders’ approach in connection with this sale.
Sanders could have explored other avenues for selling the company. A minority stake could be retained and Sanders would still have a share of the company. This would have allowed Sanders to continue to benefit from the company’s success while also receiving a significant payout for the sale. You could also look for other buyers to increase the price of your company. Sanders might have missed out by not looking into these alternatives.
Second, financial markets are under regulatory supervision. To ensure transparent and fair transactions, these regulations have been put in place. Sanders’ decision to sell his company to Brown and Massey may have been subject to scrutiny by regulatory bodies, and it is important that Sanders ensures that the sale is in compliance with all laws and regulations.
The American bank may lose this loan transaction in the following scenario: If the Canadian dollar is stronger than the U.S. one, it could result in a loss of funds. To obtain Canadian dollars for the repayment of the loan the bank must pay more U.S. Dollars if the spot rate is lower than the one at the time it was due.
If the bank chooses to hedge with the forward agreement, it will only be able to lose the difference in the forward and spot rates at the time. The bank would have secured a rate at $0.8930/Canadian Dollar. This means that the bank only needs to repay the loan in Canadian dollars if it is subject to higher spot rates. The bank is protected from any potential losses.
In summary, Sanders’ approach to the sale of his company raises concerns about exploring other options and adhering to regulatory controls. It is important to hedge against losses from foreign exchange transactions, as shown by the loan scenario. Businesses must consider all options available and follow regulations in order to make financial decisions.