Question
Tara (a U.S. firm) has no subsidiaries and presently has sales to Mexican customers amounting to MXP98 million, while its pesodenominated expenses amount to MXP61
Tara (a U.S. firm) has no subsidiaries and presently has sales to Mexican customers amounting to MXP98 million, while its pesodenominated expenses amount to MXP61 million. If it shifts its material orders from its Mexican suppliers to U.S. suppliers, it could reduce pesodenominated expenses by MXP19 million and increase dollardenominated expenses by $1,800,000. This strategy would _______ the Taras exposure to changes in the pesos movements against the U.S. dollar. Regardless of whether the firm shifts expenses, it is likely to perform better when the peso is valued _______ relative to the dollar.
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