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As a financial manager for a large multinational corporation (MNC), you have been asked to assess the firm's economic exposure. The two major currencies, other than the U.S. dollar, that affect the company are the Mexican peso (MP) and the British Pound (£). You have been given the projected future cash flows for the next year:

Currency	Total Inflow	Total Outflow
British Pounds	£17,000,000	£11,000,000
Mexican Pesos	MP 100,000	MP 25,000,000

The current expected exchange rate in U.S. dollars with respect to the two currencies is as follows:

Currency	Exchange Rate
British Pounds	$1.66 per pound
Mexican Pesos	$0.10 per peso

Create an excel spreadsheet to do the following:

a. Determine the net cash flows for both the Mexican peso and the British pound.

b. Determine the net cash flows as measured in U.S. dollars. It will represent the value of the economic exposure.

c. If the movements in Mexican Peso and the British Pound are highly correlated, how will this affect the company's degree of economic exposure?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91892001

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