Question Details

Briefly comment on the level of Blades’ economic exposure



1. For each of the three possible values of the Thai baht and the British pound, use a spreadsheet
to estimate cash flows for the next year. Briefly comment on the level of Blades’ economic exposure. Ignore possible tax effects.

2. Now repeat your analysis in question 1 but assume that the British pound and the Thai baht
are perfectly correlated. For example, if the baht depreciates by 5 percent, the pound will also
depreciate by 5 percent. Under this assumption, is Blades subject to a greater degree of economic exposure? Why or why not?

3. Based on your answers to the previous three questions, what actions could Blades take to reduce its level of economic exposure to Thailand?



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