Slide 19 of
32
Slides developed by Jeff Madura, with
additions and enhancements by Tim Richardson
Economic Exposure
uCurrency
fluctuations affect more than currency transactions
–e.g.,
an increase in inflation in France may:
F1.
lower value of outflow from France (transaction exposure)
F2. increase subsidiary’s
French sales
F3. raise financing cost in
France
Measures how greatly an MNC’s present
value of future
cash flows is affected by exchange
rate fluctuations
