AN OPERATING/ECONOMIC EXPOSURE AUSTRALIAN CASE STUDY

Q1. Transaction and operating exposure are cash flow exposures, but the literature by Srinivasulu (1981), Aggarwal and Soenen (1989), Pringle (1991) and Grant and Soenen (1991) indicated that operating exposure is the more important cash flow exposure of the two. Why?
Q2. How operating exposure can be managed?
Q3. Describe Shapiro (2002) approach to identify company’s exposure to exchange risk?
Q4. Describe Flood and Lessard (1986) framework for analyzing a firm’s competitive position and the extent of its operating exposure?
Q5. Operating exposure cannot be managed using only financial hedging, why?
Q6. What are the objectives of operating exposure management?
Q7. What are the findings of Holland’s (1992) case study of 14 UK companies that engage in international business?
Q8. What are the methods of analysis used in this case study?
Q9. What are the data sources used in this case study?
Q10. Describe the approach used in this case study to identify the exchange rate risk?
Q11. What scenarios used in the sensitivity analysis?
Q12. The period that is used for the calculation of the group’s NPV is five years, why?
Q13.The discount rate that used is 13.8 per cent, why?
Q14. What are the results of this case study?
Q15. What hedging strategies recommended in this case study?

 

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