Business

Questions 1. How much rand revenue per ounce was Harmony generating on September 11, 2001? Three years later? 2. The average exchange rate during 2001:Q2 was R8.04/$; in 2004:Q2, it was R6.60/$. Compare Harmony’s earnings per ounce in rand terms during 2001:Q2 with the same figure in 2004:Q2. 3. Given the exchange rates in question […]

Mini-Case How Rising Gold Prices Hurt Harmony The notion of gold as a store of value has flourished since September 11, 2001. On that horrible day, the price of gold stood at $288 an ounce. Three years later, it was around $420 an ounce. Harmony, a South African mining company, should have flourished as well

Characteristic Economic Effects of Exchange Rate Changes on Multinational Corporations Note: To interpret this chart, and taking the impact of a devaluation on local demand as an example, it is assumed that if import competition is weak, local prices will climb slightly, if at all; in such a case, there would be a sharp contraction

Would you expect German exports to be more or less sensitive than southern European exports to pricing pressures from a strong euro? Questions 1. Why are southern European countries particularly vulnerable to a strong euro? 2. How does the relatively high inflation rate in southern Europe add to the problems created by a strong euro?

How does the relatively high inflation rate in southern Europe add to the problems created by a strong euro? Questions 1. Why are southern European countries particularly vulnerable to a strong euro? 2. How does the relatively high inflation rate in southern Europe add to the problems created by a strong euro? 3. In contrast

Why are southern European countries particularly vulnerable to a strong euro? Questions 1. Why are southern European countries particularly vulnerable to a strong euro? 2. How does the relatively high inflation rate in southern Europe add to the problems created by a strong euro? 3. In contrast to southern Europe, northern Europe, especially Germany, exports

Mini-Case Euro Appreciation Hurts Southern European Exports Southern European countries (e.g., Spain, Greece, Italy, and Portugal) traditionally export lowtech manufactured items such as textiles, toys, and footwear that are in direct competition with inexpensive goods from China. The steady strengthening of the euro from 2002 through 2004 made exports from these countries more expensive and

Operating Exposure A real exchange rate change affects a number of aspects of the firm’s operations. With respect to dollar (HC) appreciation, the key issue for a domestic firm is its degree of pricing flexibility—that is, can the firm maintain its dollar margins both at home and abroad? Can the company maintain its dollar price

Transaction Exposure Transaction exposure arises out of the various types of transactions that require settlement in a foreign currency. Examples are cross-border trade, borrowing and lending in foreign currencies, and the local purchasing and sales activities of foreign subsidiaries. Strictly speaking, of course, the items already on a firm’s balance sheet, such as loans and

The Economic Consequences of Exchange Rate Changes We now examine more closely the specifics of a firm’s economic exposure. Solely for the purpose of exposition, the discussion of exposure is divided into its component parts: transaction exposure and real operating exposure. Place Your Order Here!