You are the CFO of a U.S. firm whose wholly owned subsidiary in Mexico manufactures component parts for your U.S. assembly operations. The subsidiary has been financed by bank borrowings in the United States. One of your analysts told you that the Mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. What actions, if any, should you take?
2006-06-18 19:23:42 · 3 answers · asked by beniyamhabt 1 in Business & Finance ➔ Other - Business & Finance
I would immediately cash out with my golden Parachute, and never work again. I would put all the liquid assets, I accumulated, into an interest bearing account, and live off the interest, in Fiji, with a pina coloda in my left hand, and my lap top in my right hand.
2006-06-18 19:35:04 · answer #1 · answered by Kipper 7 · 0⤊ 0⤋
The most obvious thing is to hedge the peso with foreign exchange futures (and/or options on futures).
But I am not sure it will be such a big problem since parts are sold in the US for US dollars. In fact it might make your expenses decline.
2006-06-18 19:28:53 · answer #2 · answered by levgrz 1 · 0⤊ 0⤋
sit down and relax to have a nice coffee and by the time i ahve finished my coffee i will know what is the next step to do.
2006-06-18 19:26:30 · answer #3 · answered by aiktongtan1974 2 · 0⤊ 0⤋