Sample Essay

Looking at the future prospect of the exchange rates we should consider that the cost of investing this $400 million now would be more effective as the incremental exchange rate would make it more costly in the future but will also affect the immediate cash flow of the business. If the investment is divided into two equal investments the company can take advantage of the $200 million in cash savings. The best option for the company is to invest 50% which is $200 million now and $200 million 1 year from now. This $200 million in the cash savings should be hedged by investing in a low risk portfolio for increased savings and profits.

Projected Savings for the Firm

The difference in exchange rates has to be considered as this would significantly cut the costs for the company and the operating expenses of the company would also be reduced as $1 would pay 6.83 Yuan. Labor costs would be reduced due to the cheaper labor available in China and a subsidy to the company in other areas.

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