How could a firms cash flows be more stable

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1. Economic exposure. Enid Ltd (UK) produces furniture and has no international business. Its major competitors import most of their furniture from Brazil and then sell it out of retail stores in the United King- dom. How will Enid be affected if Brazil's currency (the real) strengthens over time?

2. Economic exposure. Laurette SA is a French wholesale company that imports expensive high- quality luggage and sells it to retail stores around Europe. Its main competitors also import high-quality luggage and sell it to retail stores. None of these competitors hedge their exposure to exchange rate movements. The treasurer of Laureate told the board of directors that the firm's performance would be more volatile over time if it hedged its exchange rate exposure. How could a firm's cash flows be more stable as a result of such high exposure to exchange rate fluctuations?

Reference no: EM13936006

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