Question
(6 points) Company A and Company B are both U.S.-based companies that do business outside of the country. Both companies have high net receivables and
(6 points) Company A and Company B are both U.S.-based companies that do business outside of the country. Both companies have high net receivables and could be affected by unfavorable currency exchange rate movements.
Company A does about 50% of its business in Canada, 40% in the United States, and 10% in Mexico.
Company B does about 10% of its business in Canada, 40% in the United States, 10% in Mexico, 10% in France, 10% in Russia, 10% in China, and 10% in several South American countries.
Which company, Company A or Company B, is likely to benefit more from hedging its net receivables against unfavorable currency exchange rate movements? Briefly explain why.
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