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The pound’s interest rate has historically been higher 1. Potential Effects if the United Kingdom Adopted the Euro. The U.K. still has its own currency, the pound. The pound’s interest rate has historically been higher than the euros interest rate. The U.K. has considered adopting the euro as its currency. There have been many arguments about whether it should do so . Use your knowledge and intuition to discuss the likely e ...

Other / Other 04 May 2016

How could regression analysis be used to assess the impact 1. Changes in Economic Exposure. Walt Disney World built an amusement park in France that opened in 1992. How do you think this project has affected Disney’s economic exposure to exchange rate movements? Think carefully before you give your final answer. There is more than one way in which Disney’s cash flows may be affected. Explain. 2. Lagged Effects of Exchange ...

Other / Other 04 May 2016

How will Lubbock, Inc., be affected if Brazil’s currency (the real) strengthens over time 1. Economic Exposure. Lubbock, Inc., produces furniture and has no international business. Its major competitors import most of their furniture from Brazil and then sell it out of retail stores in the United States. How will Lubbock, Inc., be affected if Brazil’s currency (the real) strengthens over time ? 2. Economic Exposure. Sooner ...

Other / Other 04 May 2016

What types of Asian firms would have been affected the most 1. Impact of Exchange Rates on Earnings. Cieplak, Inc., is a U.S.-based MNC that has expanded into Asia. Its U.S. parent exports to some Asian countries, with its exports denominated in the Asian currencies. It also has a large subsidiary in Malaysia that serves that market. Offer at least two reasons related to exposure to exchange rates why Cieplak’s earnings were red ...

Other / Other 04 May 2016

Which firm is exposed to the most exchange rate risk 1. Assessing Currency Volatility. Zemart is a U.S. firm that plans to establish international business in which it will export to Mexico (these exports will be denominated in pesos) and to Canada (these exports will be denominated in Canadian dollars) once a month and will therefore receive payments once a month. It is concerned about exchange rate risk. It wants to compare the standar ...

Other / Other 04 May 2016

How will its overall transaction exposure be affected 1. Assuming Blades enters into the agreement with Jogs, Ltd., How will its overall transaction exposure be affected ? 2. Given that Thai roller blade manufacturers located in Thailand have begun targeting the U.S. roller blade market, how do you think Blades’ U.S. sales were affected by the depreciation of the Thai baht? How do you think its exports to Thailand and its import ...

Other / Other 04 May 2016

Explain how each factor influences translation exposure 1. Factors That Affect a Firm’s Translation Exposure. What factors affect a firm’s degree of translation exposure? Explain how each factor influences translation exposure . 2. Translation Exposure. Consider a period in which the U.S. dollar weakens against the euro. How will this affect the reported earnings of a U.S.-based MNC with European subsidiaries? Consider a ...

Other / Other 04 May 2016

Will the Hong Kong exporters be affected favorably or unfavorably 1. Assessing Translation Exposure. Kanab Co. and Zion Co. are U.S. companies that engage in much business within the U.S. and are about the same size. They both conduct some international business as well. Kanab Co. has a subsidiary in Canada that will generate earnings of about C$20 million in each of the next 5 years. Kanab Co. also has a U.S. business that will also re ...

Other / Other 04 May 2016

Has economic exposure changed 1. Transaction Exposure. Vegas Corp. is a U.S. firm that exports most of its products to Canada. It historically invoiced its products in Canadian dollars to accommodate the importers. However, it was adversely affected when the Canadian dollar weakened against the U.S. dollar. Since Vegas did not hedge, its Canadian dollar receivables were converted into a relatively small amount of U.S. dollars. After a ...

Other / Other 04 May 2016

Are currency correlations perfectly stable over time 1. Factors That Affect a Firm’s Transaction Exposure. What factors affect a firm’s degree of transaction exposure in a particular currency? For each factor, explain the desirable characteristics that would reduce transaction exposure. 2. Currency Correlations. Kopetsky Co. has net receivables in several currencies that are highly correlated with each other. What does this ...

Other / Other 04 May 2016