9. Hippocrates hedges its translation exposures (A-advanced). Hippocrates Inc. is a leading U.S.-based manufacturer of medical imaging

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9. Hippocrates hedges its translation exposures (A-advanced). Hippocrates Inc.

is a leading U.S.-based manufacturer of medical imaging systems such as MRI machines with headquarters offices and manufacturing facilities in St. Paul, Minnesota. Its Mexican manufacturing and assembling affiliate, domiciled in

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Mexico City, services the entire Latin American market. The French affiliate is domiciled in Paris and services the entire euro-zone area. The two affiliates’
balance sheets are prepared in Mexican pesos (MXN) and euros (€), respectively (see Exhibit 17.9). Current exchange rates are MXN 12.5 = US$1 = €0.80.

a. What is Hippocrates’ translation exposure to the Mexican peso and the euro, taking into account intracorporate transactions?

b. Would denominating in US$ all intracorporate transactions between sister affiliates or between affiliates and their parent materially affect Hippocrates’
translation exposures? How?

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