Managing currency risk-general gadget coconut scrapers

Reference no: EM1345767

General Gadget Corp. (GGC) is U.S.-based multinational firm which makes electrical coconut scrapers. These gadgets are made only in the United States using local inputs. The scrapers are sold mainly to Asian and West Indian countries where coconuts are grown.

a. If GGC sells scrapers in Trinidad, what is the currency risk faced by the firm?

b. In what currency should GGC borrow funds to pay for its investment in order to mitigate its foreign exchange exposure?

c. Assume that GGC begins manufacturing its products in Trinidad using local (Trinidadian) inputs and labor. How does this affect its exchange rate risk?

Reference no: EM1345767

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