Ford Motor Company has significant operations overseas and is exposed to foreign exchange risk. The following data is available:

16. 
    
    • Exposure to Euro: €500 million
    • Current Exchange Rate: $1.10/€
    • Expected Exchange Rate in 1 Year: $1.20/€

Requirements:

16. 
    
    3. Calculate the potential loss due to exchange rate fluctuations.
    4. Determine the impact on net income if no hedging is done.
    5. Analyze the benefits of using forward contracts to hedge the exposure.
    6. Compute the cost of hedging using options.
    7. Recommend the best hedging strategy for Ford.