Creating Cash Outflows to Match Inflows in the Same Currency Consider MNCs that produce products in the United States and export those products to developing countries. The MNCs could reduce their exposure to exchange rate risk if they set up their operations in the countries to which they export. Such a restructuring would cause a shift in expenses to the developing countries, and those expenses could be paid for with revenues earned in the same currency. Write a short essay in which you explain the practical limitations of this solution, which can help to explain why some MNCs do not pursue this strategy.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 12, Problem 1CT
Textbook Problem

Creating Cash Outflows to Match Inflows in the Same Currency Consider MNCs that produce products in the United States and export those products to developing countries. The MNCs could reduce their exposure to exchange rate risk if they set up their operations in the countries to which they export. Such a restructuring would cause a shift in expenses to the developing countries, and those expenses could be paid for with revenues earned in the same currency. Write a short essay in which you explain the practical limitations of this solution, which can help to explain why some MNCs do not pursue this strategy.

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