3. Zapata Auto Parts, the Mexican affiliate of Continental A.G. had the balance sheet shown at the foot of the previous page on January 1:

(a) What is Zapata’s peso translation exposure on January 1?

(b) Suppose the exchange rate on December 31 is Mex$12,000. What will be Zapata’s translation loss for the year?

(c) Zapata can borrow an additional Mex$15,000 (in millions). What will happen to its translation exposure if it uses the funds to pay a dividend to its parent? If it uses the funds to increase its cash position?