What is Disney’s peso transaction exposure associated with this fee?
Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$.
a. What is Disney’s peso transaction exposure associated with this fee?
b. If the spot rate expected in 90 days is $0.1305, what is the expected U.S. dollar value of the fee?
c. What is the hedged dollar value of the fee?
d. What factors will influence the hedging decision?