Select a U.S. multinational company and respond to the following questions:
In terms of currency denomination, describe how the firm prices its revenues and costs.
For MNE’s with multiple foreign operations, consider any two of those operations and the contribution they are making to the parent firm’s profits.
What means do they use to hedge against exchange rate risk?
Using this information, what do you think would be the effect of increases/decreases in the dollarexchange value on the firm profitability?
Be sure to show all applicable work.
Submitting your assignment in APA format means, at a minimum, you will need the following:
1.TITLE PAGE. Remember the Running head: AND TITLE IN ALL CAPITALS
2.ABSTRACT. A summary of your paperâ€¦not an introduction. Begin writing in third person voice.
3.BODY. The body of your paper begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The type face should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is 3-4 pages. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.
4.REFERENCE PAGE. References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper and lower case usage as appropriate for the type of resource used. Remember, the Reference Page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body citation.
This assignment will be assessed using the rubric provided.
An MNE is a multi-national enterprise, a company that has operations in more than one country. When a such a company prices its product, receives its revenues, denominates its costs, and pays its workers and suppliers in terms of US dollars , there is no effect on its revenues or costs when exchange rates change. But when prices and costs are in terms of foriegn currencies, an MNE’s revenues and costs are affected by exchange rate changes. So select the company, describe its activities. State whether it prices its products in $ or a foriegn currency. State whether it pays its suppliers and workers in the currency of the foreign country or dollars.
Assuming that it pays its workers and suppliers in the foreign country’s currency , and receives the foreign currency in payment from its foreign customers, what would happen to the company’s revenues, costs and profits if the foreign currency appreciated ? Explain.
What would happen to the company’s revenues, costs and profits if the foreign currency depreciated ? Explain.