Economic exposure to exchange rate fluctuations

Assignment Help Financial Management

Reference no: EM131315783

UVA Co. is a U.S.-based MNC that obtains 40 percent of its foreign supplies from Thailand. It also borrows Thailand’s currency (the baht) from Thai banks and converts the baht to dollars to support U.S. operations. It currently receives about 10 percent of its revenue from Thai customers. Its sales to Thai customers are denominated in baht. Explain how UVA Co. can reduce its economic exposure to exchange rate fluctuations.

Reference no: EM131315783

Questions Cloud

Economies continue to be independent of other economies : Offer your opinion on why economies of some less developed countries with strict restrictions on international trade and DFI are somewhat independent from economies of other countries. Why would MNCs desire to enter such countries? If these countries..

The facility later because the cost advantage dissipates : Some MNCs establish a manufacturing facility where there is a relatively low cost of labor, but they sometimes close the facility later because the cost advantage dissipates. Why do you think the relative cost advantage of these countries is reduced ..

Which firm is more likely to benefit from economies of scale : Bear Co. and Viking, Inc., are automobile manufacturers that desire to benefit from economies of scale. Bear Co. has decided to establish distributorship subsidiaries in various countries, while Viking, Inc., has decided to establish manufacturing s..

Explain some limitations when it hedges translation exposure : Bartunek Co. is a U.S.-based MNC that has European subsidiaries and wants to hedge its translation exposure to fluctuations in the euro’s value. Explain some limitations when it hedges translation exposure.

Economic exposure to exchange rate fluctuations : UVA Co. is a U.S.-based MNC that obtains 40 percent of its foreign supplies from Thailand. It also borrows Thailand’s currency (the baht) from Thai banks and converts the baht to dollars to support U.S. operations. Explain how UVA Co. can reduce its ..

Economic exposure to exchange rate fluctuations in the euro : Baltimore, Inc., is a U.S.-based MNC that obtains 10 percent of its supplies from European manufacturers. Sixty percent of its revenues are due to exports to Europe, where its product is invoiced in euros. Explain how Baltimore can attempt to reduce ..

Using lagging strategy to reduce transaction exposure : Under what conditions would Zona Co.’s subsidiary consider using a “leading” strategy to reduce transaction exposure? Under what conditions would Zona Co.’s subsidiary consider using a “lagging” strategy to reduce transaction exposure?

Firm could implement money market hedge : Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise..

What is the percentage change in the price of bond : Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has six years to maturity, whereas Bond Dave has 17 years to maturity. If interest rates suddenly rise by 2 percent, what is the perce..

User Account

All Pages