M7 Q6   Minelli Enterprises uses large amounts of copper in the manufacture of ceiling fans. The firm has been very concerned about the detrimental impact of rising copper prices on its earnings and has decided to hedge the price risk associated with its next quarterly purchase of copper. The current market price of copper is​ $3.00 per pound and​ Minelli's management wants to lock in this price. How can Minelli ensure that it will pay no more than​ $3 per pound for copper using a forward​ contract?   Question content area bottom Part 1 ​(Select the best choice​ below.)     A. Minelli can take a short position in a forward contract for​ copper, with a delivery date in one​ month, and a delivery price of​ $3/lb. To complete this​ transaction, Minelli must find a counterpart to take the other side of the contract.   B. Minelli can take a long position in a forward contract for​ copper, with a delivery date in one​ month, and a delivery price of​ $3/lb. The futures exchange would find a counterpart to take the other side of the contract.   C. Minelli can take a long position in a forward contract for​ copper, with a delivery date in one​ month, and a delivery price of​ $3/lb. To complete this​ transaction, Minelli must find a counterpart to take the other side of the contract.   D. Minelli might also see if there is an​ exchange-traded futures contract that would serve its purpose. This can be easily done without compromising any desired contract elements or changing risk.

Identify what transaction risk management is done in the following cases: (A) ABC Corporation will only accept P200,000 or its equivalent on the payment date despite having a USD4,000 sale. (B) ABC Corporation pays a foreign-currency denominated purchase early when it sees that the Philippine peso will decrease in value.a. Invoicing in home currency; Leadingb. Forward contract; Leadingc. Invoicing in home currency; Laggingd. Forward contract; Lagging

None

Case-in-brief - Chapter 6 - Argentina Currency Devaluation Your company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued. It wants to examine two scenarios: one where the currency drops 15% and one where it drops 25%. Currently, the exchange rate is 92 pesos (ARS$ 92) to 1 US dollar (US$1). Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage. Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos) Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Units ARS % 46 325.9 100% 183.3 56% 142.6 44% 73.3 22% Contribution after Marketing 69.3 21% QUESTION 2 How much more sales revenue would be needed in Argentina to maintain your current contribution after marketing? Additional Manufacturer Sales in Argentine Pesos after 15% drop: 0.000 Additional Manufacturer Sales in Argentine Pesos after 25% drop: 0.000