Global Investors based in Cairo, Egypt are of the view that its last quarter 2020 sales due to the impact of COVID -19 in Nigeria could slip sales to N10, 000,000 and expects the exchange rate to be $0.002 per Naira (dollar earnings are there expected to be $20,000).

a) If the exchange rate unexpectedly changes to $0.0016 per Naira and Global Investors has not hedged, what are losses due to operation exposure?

b) How could Global Investors eliminate its operating exposure?

c) Suppose that Global Investors relocates production to Nigeria and expects last quarter costs of production and distribution to be N5, 000,000 leaving a net profit of N5, 000,000 if sales remain constant. Would you

recommend that Global Investors hedge the entire N10, 000,000?

d) How do you explain if in either event, what will Global Investors hedging

activity do to the expected profitability in US dollars and in Nigeria Naira?