Brookes Company is a U.S. firm preparing its financial plan for the upcoming year.It has no foreign subsidiaries, but the majority of its sales are from exports to Australia, Canada, Argentina and Taiwan.Estimated foreign cash inflows to be received from exports and foreign cash outflows to be paid for imports over the next year are shown below:

CurrencyTotal InflowTotal Outflow

Australia dollars (A$) A$33,000,000 A$3,000,000

Canada dollars (C$)C$6,000,000C$2,000,000

Argentina pesos (AP) AP12,000,000 AP11,000,000

Taiwan dollars (T$)T$5,000,000T$9,000,000

Today's spot rates and one-year forward rates in US$ are as follows:

CurrencySpot RateOne-Year Forward Rate

A$$ .91$ .94

C$.61.60

AP.19.16

T$.66.65

1.Assume that the A$ net inflows may range from A$20,000,000 to A$40,000,000 over the next year.Explain the risk of hedging A$30,000,000 in net inflows.What would you recommend that Brookes do to avoid that risk?Are there any tradeoffs or disadvantages associated with your recommendation? Be specifi