Below are the forecasted gross margins for company A's foreign subsidiary. As CFO, you are forecasting a 25% devaluation of the local currency. Please calculate the subsidiary's local currency exposure and its potential loss in the event of a 25% devaluation of the local currency, (B) In anticipation of the devaluation, what actions would you consider to reduce the subsidiary's local currency exposure.
Company A L.C. Rate US$
Sales - L.C. 625 0.40 250
Sales - US$ 125 0.40 50
Sales - Total 750 0.40 300
COGS - L.C. 425 0.40 170
COGS - US$ 250 0.40 100
COGS - Total 675 0.40 270
Gross Margin 75 0.40 30