Chapter 11 - Translation Exposure

Please provide your discussion for the following questions on 14^th edition.

12, 13, 14, & 15

12.Translation Exposure Management.What are the primary options firms have to manage translation exposure?

13.Accounting or Cash Flow.If a U.S.-based multinational company generates more than 80% of its profits (earnings) outside the U.S. in the euro zone and Japan, and both the euro and the yen fall significantly in value versus the dollar as occurred in the second half of 2014, is the impact on the firm only accounting or does it alter cash flow, or both?

14.Balance Sheet Hedge Justification.When is a balance sheet hedge justified?

15.Realization and Recognition.When would a multinational firm, if ever, realize and recognize the cumulative translation losses recorded over time associated with a subsidiary?

Chapter 12 - Operating Exposure

Please provide your discussion for the following questions on 14^th edition.

10, 11, 15, &16

10.Diversification.How can a multinational firm diversify operations? How can it diversify its financing? Do you believe these are effective ways of managing operating exposure?

11.Proactive Management. Operating exposures can be partially managed by adopting operating or financing policies that offset anticipated foreign exchange exposures. What are four of the most commonly employed proactive policies?

15.Currency Swaps. Explain how currency swaps can hedge foreign exchange operating exposure. What are the accounting advantages of currency swaps?

16.Hedging the Unhedgeable.How do some firms attempt to hedge their long-term operation exposure with contractual hedges? What assumptions do they make in order to justify contractual hedging of their operating exposure? How effective is such contractual hedging in your opinion?