Rolls-royce the british jet engine manufacturer sells, Ask an Expert

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Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies. Suppose it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also has borrowed $600 million. The current spot rate is $1.9528/£.

a. What is Rolls-Royce’s dollar transaction exposure in dollar terms? In pound terms?

b. Suppose the pound appreciates to $2.064/£. What is Rolls-Royce’s gain or loss, in pound terms, on its dollar transaction exposure?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92688911

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