Minicase San Pico

San Pico is a rapidly growing Latin American developing country. The country is blessed with miles of scenic beaches that befool attracted tourists by the thousands in recent years to new resort hotels financed by joint ventures of San Pico businessmen and moneymen from the Middle East, Japan, and the United States. Addition whollyy, San Pico has good natural harbors that are contributive for receiving imported merchandise from abroad and exporting merchandise produced in San Pico and otherwise surrounding countries that lack access to the sea.Because of these advantages, legion(predicate) new businesses are being started in San Pico. Presently, stock is traded in a cramped building in La Cobijio, the nations capital. Admittedly, the San Pico Stock Exchange arrangement is rather archaic. Twice a day an ex officio of the exchange will call out the name of each of the 43 companies whose stock trades on the exchange. Brokers wanting to buy or sell shares for their clients then mo vement to make a trade with one another.This crowd trading system has worked well for over one hundred years, but the government desires to replace it with a new recent system that will allow greater and more frequent opportunities for trading in each company, and will allow for trading the shares of the many new start-up companies that are expected to trade in the secondary market. Additionally, the government administration is rapidly privatizing many state-owned businesses in an attempt to foster their efficiency, obtain distant exchange from the sale, and convert the country to a more capitalist economy.The government believes that it would conduct this privatization faster and perhaps at more attractive prices if it had a modern stock exchange facility where the shares of the newly privatized companies will eventually trade. You are an expert in the operation of secondary stock markets and have been retained as a consultant to the San Pico Stock Exchange to offer your experti se in modernizing the stock market. What would you advise? Explain. Most new and renovated stock exchanges are being accomplished these days as either a partially or fully automated trading system.A fully automated system is e specificly beneficial for a small to medium size country in which there is only moderate trading in most issues. Such a system that deserves special note is the continuous National Integrated Market system of New Zealand. This system is fully computerized and does not require a physical structure. Essentially all buyers and sellers of a stock enter through their broker into the computer system the number of shares they desire to buy or sell and their required transaction price. The system is updated constantly as new purchase or sale orders are entered into system.The computer constantly searches for a match between buyer and seller, and when one is tack a transaction takes place. This type of system would possible serve San Picos needs very well. There is existing technology to implement, the bugs have been worked out in other countries, and it would satisfy all the demands of the demands of the San Pico government and easily accommodate growth in market activity MINI CASE SARA LEE CORP. S EUROBONDS The strange Finance in Practice boxed reading in the chapter discussed a three-year $100 million Eurobond issue by Sara lee Corporation.The article also mentions other bond issues recently placed by various foreign divisions of Sara Lee. What thoughts do you have about Sara Lees debt financing strategy? Suggested Solution to Sara Lee Corp. s Eurobonds Sara Lee is the ideal candidate to issue Eurobonds. The company has worldwide name recognition, and it has an excellent credit rating that allows it to place new bond issues easily. By issuing dollar denominated Eurobonds to Swiss investors, Sara Lee can bring new issues to market much more quickly than if it sold domestic dollar denominated bonds.Moreover, the Eurodollar bonds likely sel l at a lower yield than comparable domestic bonds. Additionally, it appears as if Sara Lee is raising funds in a variety of foreign currencies. Sara Lee most likely has large cash inflows in these same currencies that can be used to meet the debt service obligations on these bond issues. indeed Sara Lee is finding a use for some of its foreign currency receipts and does not have to be concerned with the exchange rate dubiety of these part of its foreign cash inflows.