Suppose you are the Director of Finance at a multinational corporation (MNC) thats headquartered in the U.S.
Question:
Suppose you are the Director of Finance at a multinational corporation (MNC) that’s headquartered in the U.S. The cost of capital for this MNC is 12.2%. You are examining this data that you received from the affiliates. The analyst in your department has prepared the tables below that show cash inflows and cash outflows in local currencies and exchange rates. Assume the data is for Quarter 4, 2004. Use this data to assess currency risk.
Use Excel.
1. In Table 2, which currency do you think is contributing the most risk? Why? Explain. 2. In Table 2 and Table 3, what approaches would you use to estimate exchange rate risk? 3. Will the approach be different for Table 2 versus Table 3? Why? Explain. 4. Is it necessary to look at these risks at all? Why or why not? Explain.
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart