This firm could cover its foreign exchange exposure

Assignment Help Financial Management

Reference no: EM132073298

XX corp is a robotics manufacturer based in the US, has won a bid to deliver equipment to a Swiss automobile company. the bid is SF8 million. the firm will receive the entire SF 8 million in 6 months from now. the present spot rate is SF8.00/S and six-month forward rate is SF 8.20/$ the borrowing rate in US is 12% and 17 in Swiss. the cost of capital is 14% p.a. (an international finance question)

1) Explain the various ways in which this firm could cover its foreign exchange exposure.

2) What is the break-even cost of capital have to be for them to be indifferent between forward hedge and money market hedge?

Show all steps and explanations.

Reference no: EM132073298

Questions Cloud

What is the new value of retained earnings account : What are the retained earnings for the year. What is the new value of retained earnings account?

Success rate of open surgery : Is there significant evidence that the success rate of procedure in treating kidney stones is different than the success rate of open surgery?

What is the legacy you hope to leave for the nursing : What is the legacy you hope to leave for the nursing discipline and What contributions will you make - How will these impact the future of nursing

Identify the facilitators for the green project : Some organizational factors increase a project's likelihood of success. Identify these "facilitators" for the Green project. Outline the things that McCann need

This firm could cover its foreign exchange exposure : Explain the various ways in which this firm could cover its foreign exchange exposure.

What is the role of the organizations leader in its culture : If you were the CEO of your organization what would you do to change its culture - or would you not make changes?

Describe a decision-making scenario : Describe a decision-making scenario using your business experience, personal decision making or cited journal article;

What precautions are necessary to preserve evidence state : What are the main concerns when collecting evidence? What precautions are necessary to preserve evidence state? How do you ensure evidence remains.

List the techniques that may have swayed your choices : Consider the last two major purchases you made, and list the techniques that may have swayed your choices.

User Account

All Pages