3 Using a spreadsheet, compare the hedging alternatives for the British pound receivables with a scenario under which Aussie Blades remains unhedged. Do you think Aussie Blades should hedge or remain unhedged?

Which hedge is the most appropriate for Aussie Blades?

Aussie Blades, Pty Ltd has recently decided to expand its international trade relationship by exporting to the United Kingdom. Jogs Ltd, a British retailer, has committed itself to the annual purchase of 200,000 pairs of Speedos, Aussie Blades’ primary product, for the price of £80 per pair. The agreement is to last for two years, at which time it may be renewed by Aussie Blades and Jogs.

In addition to this new international trade relationship, Aussie Blades continues to export to Thailand. Its primary customer there, a retailer called Rolling Products, is committed to the purchase of 180,000 pairs of Speedos annually for another three years at a fixed price of 4594 Thai baht per pair. When the agreement terminates, it may be renewed by Aussie Blades and Rolling Products.