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Estimate the dollar cash flows you will need as a result of using each strategy. If the estimate for a particular strategy involves a probability distribution.
Assess the data in a logical manner to determine which firm has a higher degree of exchange rate risk.
It wants to know how its stock price is affected by changes in the Singapore dollar's exchange rate.
The United Kingdom still has its own currency, the pound. The pound's interest rate has historically been higher than the euro's interest rate.
It considers a change in its pricing policy, in which it will price its products in dollars instead of pounds.
The exports are not hedged. The Australian dollar is presently worth .50 U.S. dollars, but you expect that it will be worth .45 U.S. dollars.
The inflation in Japan is expected to rise substantially while the U.S. inflation will remain at a low level.
What does your answer imply about Kopetsky Co. or any other firm using past data on correlations as an indicator for the future?
If the euro weakens for several years, can you think of any change that might occur in the global chemicals market?
If Toyota established more plants in the United States, how might the regression coefficient on the exchange rate variable change?
How can a U.S. company use regression analysis to assess its economic exposure to fluctuations in the British pound?
How could Logan adjust his operations to reduce his economic exposure? What is a possible disadvantage of such an adjustment?
Why would an MNC consider examining only its "net" cash flows in each currency when assessing its transaction exposure?
Coastal Corp. is a U.S. firm with a subsidiary in the United Kingdom. It expects that the pound will depreciate this year.
Bartunek Co. is a U.S.-based MNC that has European subsidiaries and wants to hedge its translation exposure to fluctuations in the euro's value.
Which firm is subject to a higher degree of economic exposure? Explain.
Which firm is subject to a higher degree of translation exposure? Explain.
Opportunities in Less Developed Countries Offer your opinion on why economies of some less developed countries with strict restrictions on international trade .
In August 2001, Ohio, Inc., considered establishing a manufacturing plant in central Asia, which would be used to cover its exports to Japan and Hong Kong.
Why might the overall risk of JCPenney decrease or increase as a result of its recent global expansion?
Explain whether you think Myzo's strategy for direct foreign investment is feasible.
However, outsourcing eliminates some jobs in the United States, which reduces or eliminates income for people whose job was outsourced.
Determine the prevailing one-year interest rate of the Australian dollar, the Japanese yen, and the British pound. Assuming a 2 percent real rate of interest.
If you were to use purchasing power parity to predict the future exchange rate over the next year for the local currency of each country against the dollar.
If the IFE holds, how will the nominal return to U.S. investors who invest in Brazil be affected by the higher inflation in Brazil? Explain.