Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies.
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Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies. Suppose it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also borrowed $600 million. The current spot rate is $1.9528/£.
a. What is Rolls-Royce’s dollar transaction exposure in dollar terms? In pound terms?
b. Suppose the pound appreciates to $2.064/£. What is Rolls-Royce’s gain or loss, in pound terms, on its dollar transaction exposure?
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Related Book For
Foundations Of Multinational Financial Management
ISBN: 9780470128954
6th Edition
Authors: Alan C Shapiro, Atulya Sarin
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