The Impact of Korean Won Devaluation

Student’s Name
Instructor
Course Title
DATE
The Korean Won Devaluation
Discuss the impact of devaluation of won on the annual profit repatriation in US dollar
The devaluation of the South Korean Won against the dollar affects imports and exports, making South Korean exports cheaper and imports more expensive. On the other hand, it is cheaper for the US division to import semiconductors from Korea, but US dollars will reduce profits. Devaluation will likely have a positive effect on production, and KOAM Electronics Company will manufacture more semiconductors. While there will be cheaper purchases by Midwest Sportswear, Inc. from KOAM, if KOAM purchases some components from outside the US, this will increase the cost of production.
Devaluation affects the purchasing power and profits in the US $ after the devaluation of and after translating Korean subsidiary profit, and there will be less when reported a profit in the US. For the US Company, investing in KOAM, it is cheaper to acquire assets in Korea after the devaluation of the won. There would be economic exposure if there were a drastic devaluation, but the devaluation is 19.83% from W484/$ to W580/$. At 2,000 million won investment at the initial exchange rate, this is $ 4.132 million, and after devaluation, the equivalent is $ 3.448 million. Thus, Willingford will save money when relying more on internal financing for the proposed equity contribution, but the company will repatriate less profit than anticipated.
The advantage of devaluation on the Korean subsidiary and economy is also linked to price competitiveness. In this way, Korean production is favored, and ...