Question Details

Why are the cash flows of a purely domestic firm exposed 



1.	Exposure of Domestic Firms. Why are the cash flows of a purely domestic firm exposed to exchange rate fluctuations?
2.	Transaction Exposure. Aggie Co. produces chemicals. It is a major exporter to Europe, where its main competition is from other U.S. exporters. All of these companies invoice the products in U.S. dollars. Is Aggie- transaction exposure likely to be significantly affected if the euro strengthens or weakens? Explain. If the euro weakens for several years, can you think of any change that might occur in the global chemicals market?



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