Managing foreign exchange exposure

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Reference no: EM133130919

Walmart is the world's largest MNE by revenue (over $US500b annually) with 11,700 outlets in 28 countries (but not Australia).

Walmart sources the products it sells from all over the world, so managing foreign exchange exposure is therefore extremely important for the company.

Operating exposure looks at how unexpected changes in exchange rates affect company value.

Consider a risk free rate of 3.5%, domestic and international market returns of 12% and 11% respectively, and domestic and international betas of 0.9 and 0.8 respectively. Given this data, calculate the cost of equity for Walmart using both CAPM and ICAPM. Should Walmart source equity domestically or internationally?

Reference no: EM133130919

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