Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. short term exchange rate risks can be hedged. but,

Short term exchange rate risks can be hedged. But, what about the long term risks...

80.2K

Verified Solution

Question

Accounting

Short term exchange rate risks can be hedged. But, what about the long term risks like that posed by the Japanese yen strengthening from 300 yen to the U.S. dollar to 100 yen to the U.S. dollar over a 20 year period? A Toyota Corolla that costs 3,000,000 yen to build at 300/1 would cost $10,000 to build and could sell for $13,000 which is a 30% profit. But, at 100/1 3,000,000 yen would cost $30,000 to build and would be priced out of the market. The answer was to build Toyota cars in the U.S. to avoid the risk of long term exchange rates. Discuss the decision making process in terms of "immunizing" the Income Statement and "immunizing" the Balance Sheet.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Explain the mechanism of transport of oxygen by blood. And explain the mechanism of transport of...

Medical Sciences
Q

Prove the Hamilton-Rodrigues theorem using the finite rotation formula.

Physics
Q

Problem 2. A nuclear power plant produces radioactive waste as a byproduct. One such byproduct is...

Physics
Q

Question No 1 A double slit interference experiment is carried out in air and the...

Physics
Q

urveyor standing on a hill 27 feet high looks at a building across a river...

Basic Math
Q

Tom and Jeremy have an above ground circular pool with a circumference of 47.1 ft?...

Algebra
Q

6 1 point In the equation below solve for x a 12x m x 12m...

Algebra
Q

Financial information is presented below: Operating expenses $ 36000...

Accounting
Q

Casey Company bought a machine on January 1, Year 1. The machine cost $144,000, the...

Accounting
Q

Q9. Which one of the following statements about the Segmented Market Theory is true? A....

Finance
Q

E8-16 Preparing Cash Budget [LO 8-4] Walter Company has the following information for the month...

Accounting
Q

Which of the following is NOT a type of business organization? A. Corporation B. An...

Accounting