CHAPTER 10 QUIZ 31
Exposure of Net Cash Flows. Each of the following U.S. firms is expected to generate $40
million in net cash flows (after including the estimated cash flows from international sales if there
are any) over the next year. Ignore any tax effects. Each firm has the same level of expected
earnings. None of the firms have taken any positions in exchange rate derivatives to hedge their
exchange rate risk. All payments for the international trade by each firm will occur one year from
today.
Sunrise Co. has ordered imports from Austria, and its imports are invoiced in euros. The dollar
value of the payables (based on today- exchange rate) from its imports during this year is $10
million. It has no international sales.