Total translated net income from the canadian subsidiary

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Nelson, Inc. hedges 50% of their translation exposure one calendar quarter in advance, and rolls the contracts when they mature. Currently 1st quarter net income is projected to be 125 million Canadian dollars. The current spot rate is .98 US dollars per Canadian dollar, and the forward rate to March 31, 2011, the end of 1st quarter, is .987 US dollars per Canadian dollar. On 3/31/2011 the spot rate is now 1.045 US dollars per Canadian dollar.

(a) Explain how you would put in place a hedge on 50% of the forecasted net income.

(b) On 3/31 what do you now need to do?

(c) What is your total translated net income from the Canadian subsidiary including the impact of the hedge on 3/31/2011?

Reference no: EM132068798

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