19. Currency Risk. If investors recognize the impacts of inflation and exchange rate changes on a firm's cash flows, changes in exchange rates should be reflected in stock prices. How would the stock price of each of the following Swiss companies be affected by an unanticipated apprecia- tion in the Swiss franc of 10%, only 2% of which could be justified by comparing Swiss infla- tion to that in the rest of the world? (LO3)

a. Swiss Air: More than two-thirds of its employees are Swiss. Most revenues come from inter- national fares set in U.S. dollars.

b. Nestl: Fewer than 5% of its employees are Swiss. Most revenues are derived from sales of consumer goods in a wide range of countries with competition from local producers.

c. Union Bank of Switzerland: Most employees are Swiss. All non-Swiss franc monetary posi- tions are fully hedged.