Substantial exchange rate risk

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1. What is the business reason for China Noah's potential currency exposure? Does the company really need to subject itself to substantial exchange rate risk? Is the risk "material" to China Noah? Do you think China Noah should hedge?

2. How does China Noah's profitability (using return on sales as the primary metric) change depending on whether the IDR/CNY exchange rate follows (a) forecast spot rates, (b) forward rate quotes, or (c) fixed rate baseline assumption?

3. Assuming Noah made 6-month payments on its wood purchases from Indonesia, what is the schedule of foreign currency amounts over time?

4. What would be your outlook on the future direction of the Indonesian rupiah and the Chinese renminbi (yuan)? Should this influence the hedging approach used by Noah?

5. Which of the hedging choices would you recommend?

Reference no: EM131456017

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