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International Business Case 10


Submitted By fstefano
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Francisco Huber
BS 455

Case 10

1) Blades is subject to transaction and economic exposure. This is because transaction exposure is the degrees to which the value of future cash flows can be affected due to exchange rate fluctuations. On the other hand, economic exposure is the degree to which a firm’s present value of future cash flows can be influenced by exchange rate fluctuations.

2) Currency | Total Inflow | Total outflow | Net inflow/outflow | expected exchange rate | Net inflow or outflow in U.S Dollars | British Pound (200,000pairs x 80 pounds per pair | £16.000.000,00 | $ - | £16.000.000,00 | $ 1,50 | $24.000.000,00 | Japanese Yen (1,700 pairs x 7440 yen per pair) | ¥- | ¥12.648.000,00 | ¥-12.648.000,00 | $ 0,0083 | $-104.978,40 | Thai Baht Inflow (180,000 pairs x 4594 per pair) Outflow (72000 x 2871 per pair) | 826.920.000,00 ฿ | 206.712.000,00 ฿ | 620.208.000,00 ฿ | $ 0,024 | $14.884.992,00 |

Currency | Net inflow/outflow | Expected range of possible exchange rates | Range of possible inflows or outflows in US Dollars | British Pound | £16.000.000,00 | $1,47 to $1,53 | $23,520,000 to $24,480,000 | Japanese Yen | ¥-12.648.000,00 | $0,0079 to $0,0087 | ($99,919.20) to ($110,037.60) | Thai Baht | 620.208.000,00 ฿ | $0.020 to $0.028 | $12,404,160 to $17,365,824 |

3) Because Blades generates net inflows in Thai baht but net outflows denominated in Japanese yen the increased correlations between the Japanese yen and the Thai baht will reduce Blades’ level of transaction exposure if does not sign the agreement with the British firm but it continues its current importing and exporting to Asia.

4) I think that by importing components from Japan the transaction exposure will not be reduced because the correlation between the Thai baht and Japanese yen has been very unstable in the past.

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