Vixor Co is a U S firm conducting a financial plan for the next year It has no foreign subsidiaries, but more than half of its sales are from exports Its foreign cash inflows to be received from exporting and cash outflows to be paid for imported supplies over the next year are shown in the following table Currency Total Inflow Total Outflow Candian Dollar (C$ C$40,000,000 C$10,000,000 New Zealand Dollar (NZ$) NZ$5,000,000 NZ$1,000,000 Mexican Peso (MXP) MXP11,000,000 MXP5,000,000 Singapore Dollar (S$) S$4,000,000 S$8,000,000 The spot rates and one year forward rates as of today are shown below Currency Spot Rate One Year Forward Rate C$ $ 70 $ 73 NZ$ $ 60 $ 59 MXP $ 04 $ 03 S$ $ 69 $ 68 Based on the information provided, determine Vixors net exposure to each foreign currency in dollars Assume that todays spot rate is used as a forecast of the future spot rate one year from now The NZ$, MXP S$ are expected to move tandem against the US$ over the next year The C$ movements are expected to be unrelated to movements of the other currencies Because exchange rates are difficult to predict, the forecasted net dollar cash flows per currency may be inaccurate What offsetting exchange rate effects can you anticipate from whatever exchange rate movements do occur Explain Given the forecast of the Canadian dollar along with the forward rate of the Canadian dollar, what is the expected increase or decrease in dollar cash flows that would result from hedging the net cash flows in Canadian dollars Would you hedge the Canadian dollar position Assume that the Canadian dollar net inflows may range from C$20,000,000 to C$40,000,000 over the next year Explain the risk of hedging C$30,000,000 in net flows How can Vixor Co avoid such a risk Is there any tradeoff resulting from your strategy to avoid that risk Vixor Co recognizes that its year to year hedging strategy hedges the risk only over a given year but does not insulate it from long term trends in the Canadian dollars value It has considered establishing a subsidiary in Canada The goods would be sent from the United States to the Canadian subsidiary and distributed by the subsidiary in Canada In this way, Vixor Co would not have to convert Canadian dollars to U S dollars each year Has Vixor eliminated its exposure to exchange rate risk by using this strategy Explain

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Vixor Co. is a U.S. firm conducting a financial plan for the next year. It has no foreign subsidiaries, but more than half of its

Vixor Co. is a U.S. firm conducting a financial plan for the next year. It has no foreign subsidiaries, but more than half of its sales are from exports. Its foreign cash inflows to be received from exporting and cash outflows to be paid for imported supplies over the next year are shown in the following table:

Currency	Total Inflow	Total Outflow
Candian Dollar (C$	C$40,000,000	C$10,000,000
New Zealand Dollar (NZ$)	NZ$5,000,000	NZ$1,000,000
Mexican Peso (MXP)	MXP11,000,000	MXP5,000,000
Singapore Dollar (S$)	S$4,000,000	S$8,000,000

The spot rates and one-year forward rates as of today are shown below:

Currency	Spot Rate	One-Year Forward Rate
C$	$.70	$.73
NZ$	$ .60	$.59
MXP	$.04	$.03
S$	$.69	$.68

Based on the information provided, determine Vixors net exposure to each foreign currency in dollars.
Assume that todays spot rate is used as a forecast of the future spot rate one year from now. The NZ$, MXP & S$ are expected to move tandem against the US$ over the next year. The C$ movements are expected to be unrelated to movements of the other currencies. Because exchange rates are difficult to predict, the forecasted net dollar cash flows per currency may be inaccurate. What offsetting exchange rate effects can you anticipate from whatever exchange rate movements do occur? Explain.
Given the forecast of the Canadian dollar along with the forward rate of the Canadian dollar, what is the expected increase or decrease in dollar cash flows that would result from hedging the net cash flows in Canadian dollars? Would you hedge the Canadian dollar position?
Assume that the Canadian dollar net inflows may range from C$20,000,000 to C$40,000,000 over the next year. Explain the risk of hedging C$30,000,000 in net flows. How can Vixor Co. avoid such a risk? Is there any tradeoff resulting from your strategy to avoid that risk?
Vixor Co. recognizes that its year-to-year hedging strategy hedges the risk only over a given year but does not insulate it from long-term trends in the Canadian dollars value. It has considered establishing a subsidiary in Canada. The goods would be sent from the United States to the Canadian subsidiary and distributed by the subsidiary in Canada. In this way, Vixor Co. would not have to convert Canadian dollars to U.S. dollars each year. Has Vixor eliminated its exposure to exchange rate risk by using this strategy? Explain.