Finish Chapter 10: Prob. # 1,6,12 (‘Questions and Applications’ – at end of each chapter)
1. Transaction versus Economic Exposure Compare and contrast transaction exposure and eco- nomic exposure. Why would an MNC consider exam- ining only its “net” cash flows in each currency when assessing its transaction exposure?
6. Transaction Exposure Fischer, Inc., exports products from Florida to Europe. It obtains supplies and borrows funds locally. How would appreciation of the euro likely affect its net cash flows? Why?
12. Economic Exposure Longhorn Co. produces hospital equipment. Most of its revenues are in the United States. About half of its expenses require out- flows in Philippine pesos (to pay for Philippine mate- rials). Most of Longhorn’s competition is from U.S. firms that have no international business at all. How will Longhorn Co. be affected if the peso strengthens?