Imagine you are the treasurer of a NZ company exporting dairy products to the United States. All revenues are received in USD and all other expenses (e.g., R&D costs, costs of employees etc.) are incurred in NZ dollars.

(a) Discuss whether you need to hedge the foreign exchange risk and factors you need to consider when designing contracts to hedge the risks.

(b) If the company is able to raise the price of its product in USD if NZD appreciates without affecting the sales volume, how would you adjust your recommendation in part (a) and sell your strategy to other executives?