| Slide 19 of 32 |
| Economic Exposure |
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| Measures
how greatly an MNC’s present value of future |
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| cash flows is
affected by exchange rate fluctuations |
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| u | Currency
fluctuations affect more than |
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| currency
transactions |
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| – | e.g., an
increase in inflation in France may: |
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| F | 1. lower value of
outflow from France |
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| (transaction
exposure) |
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| F | 2. increase
subsidiary’s French sales |
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| F | 3. raise
financing cost in France |
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