Problemdell computers sold a super computer to the, Ask an Expert

Finance

Problem:

Dell Computers sold a super computer to the Institute in Italy on credit and invoiced €5 million payable in six months. Currently, the six-month forward exchange rate is $1.15/€ and the foreign exchange advisor for Dell Computers predicts that the spot rate is likely to be $1.03/€ in six months.

Required:

Question 1: What is the expected gain/loss from the forward hedging?

Question 2: If you were the financial manager of Dell Computers, would you recommend hedging this euro receivable? Why or why not?

Note: Please show how you came up with the solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162884

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