The peso could reduce our dollar cash flows

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Reference no: EM131831226

We already aware that a decline in the value of the peso could reduce our dollar cash flows. Yet, according to the purchasing power parity, a weak peso should occur only in response to a high level of Mexican inflation, and such high inflation should increase our profits. If this theory holds precisely, our cash flows would not be really exposed. Should we be concerned about exposure, or not? Explain.

Reference no: EM131831226

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