You are asked to provide a report, which evaluates your firm$$s exposures, the risk management implications for your firm, and possible hedging strategies for the next $12$ months. You are also required to provide a recommendation for what your firm should do$.$

Information about Firm ABC:

$1.$ Firm ABC is a food manufacturer located in Australia.

$2.$ The firm plans to replace their old machine and equipment with the latest models. They will buy machine and equipment from manufacturers located in France and United States. The new machine and equipment will be delivered in $6$ months$$ time.

$3.$ The firm exports its products to Singapore, Japen, the United Kingdom.

$4.$ The firm has a payment of $3,000,000$EUR due in $3$ months and then another $3,000,000$EUR due in $6$ months to the machine manufacturer in France. The firm need to pay $5,000,000$USD to the machine manufacturer in the United States in $2$ months and then another $5,000,000$USD in $6$ months.

$5.$ The firm is due to receive $3,000,000$ SGD from their customer in Singapore every $3$ months over the next $6$ months and then $3,500,000$SGD every $3$ months after they receive the new machine. They will also receive a payment of $6,000,000$ GBP from their customer in the United Kingdom in $3$ months and a payment of $50,000,000$ JPY from their customer in Japen in $5$ months.

$6.$ The firm has $2,000,000$ EUR kept in a term deposit account earning an interest rate of $3\mathrm{.}5\%$per annum in France. The term deposit matures in $3$ months.

$1.$ Discuss and evaluate the types of exposures your firm may face as well as the other main concerns for your firm. In your discussion, you should consider the effects of the current economic climate on the foreign exchange market and the competitiveness of the products produced in Australia and relate this to how these may impact the firm.

$2.$ List the future spot exchange rates $($the currency pair and the relevant month$)$ that directly affect your firm and form a forecast $($a number is required$)$ for each of these future spot exchange rates. You need to briefly analyse the factors affecting these exchange rates and then form your forecasts.

$3.$ Design hedging strategies for the firm$$s foreign currency exposures. You need to explain why your chosen hedging strategies are better than the other strategies by calculating and then evaluating the hedging outcomes $$ what will the outcomes be if exposures are hedged using your hedging strategies and what will the outcomes be if exposures are not hedged or using other hedging strategies. Please also discuss the impacts of hedging foreign currency exposures on the firm$$s cost of capital and firm value.