International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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- Explain how multinational companies can reduce the foreign currency risk by hedging.arrow_forwardIf the United States imports more goods from abroad than it exports, thenforeigners will tend to have a surplus of U.S. dollars. What will this do tothe value of the dollar with respect to foreign currencies? What is the corresponding effect on foreign investments in the United States?arrow_forwardIn the following cases, state which type of exchange rate risk the company is facing and wheter this risk is beneficial or harmful in nature. A British power-generating company imports coal from Germany, paying for the coal in euros. The company expects the pound to weaken against the euro over the next year. A UK toy company supplies only the domestic market. Its only major competitor in this market if a US toy company. The pound is expected to weaken against the dollar over the next year. A UK company has bought a factory in France, financing the purchase with a sterling borrowing. Over the next year the pound is expected to appreciate against the euro.arrow_forward
- How can the Greater Liberalizations and removal of barrier to trade can stimulate FDI that can incentivise firms to invest overseasarrow_forwardThere are both long-term benefits and problems for Euro zone firms in nations using the Euro as their common currency. While such firms will enjoy improved financial planning, using a common currency in business transactions increases exchange-rate risk.TrueFalsearrow_forward
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