Reference no: EM131085367
Question 3- Exchange Rate Exposures
A domestic firm, Home Company, is evaluating the effect of an appreciation in the home currency on the firm's economic exposure. In each of the following categories of economic exposure, indicate whether the domestic currency appreciation is likely to have a positive or negative effect on Home Company's cash flow. State your conclusion and offer an one-sentence explanation for you conclusion as in the example shown for the first row.
Direct economic exposure
Revenue from sales abroad negative - foreign revenue worth less in home currency terms
Cost of inputs sourced
(purchased) abroad
Profits repatriated from
abroad
Foreign tax liabilities
Indirect economic exposure
Position vis-à-vis a competitor
who sources abroad
Domestic competitor who sells abroad
Foreign competitor who sells
in Home Co.'s country
Supplier who sources abroad
Customer who sells abroad
Customer who sources abroad
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