At this point, the demand in Mexico is pick up nicely. Your company is currently repatriate 47 million pesos per year from Mexico through ESL class offering and English learning material sales. In addition your company is also import Spanish learning material package produced in Mexico and the company needs to pay about 7 million peso a year from an independent subcontractor located in Mexico. Given recent exchange rate volatility increase, you are asked to identify a good alternative to hedge your company’s transaction exposure.

a. Should you hedge peso denominate cash inflow (receivable from export English learning materials and earnings from operation) and cash outflow (payable for import) separately or total cashflows (cash inflow plus cash outflow) or net cashflows (the difference between cash inflow and case outflow)? Why?