Suppose a U. S. firm has an asset in Britain whose local currency price is random. For simplicity, suppose there are only three states of the world and each state is equally likely to occur. The future local currency price of this British asset (P*) as well as the future exchange rate (S) will be determined, depending on the realized state of the world.

State Probability P* S S×P*
1 1/3 £1,000 $1.40/£ $1,400
2 1/3 £1,000 $1.50/£ $1,500
3 1/3 £1,000 $1.60/£ $1,600

Which of the following statements is most correct?
A) The firm faces no exchange rate risk since the local currency price of the asset and the exchange rate are negatively correlated.
B) The firm faces substantial exchange rate risk since the local currency price of the asset and the exchange rate are positively correlated.
C) The firm's exchange rate exposure can be completely hedged with derivatives written on the British pound.
D) Since randomness is involved, no hedging is possible.

Goods and services that can be used for the same purpose are and goods and services that are used together are

You are frustrated to find that the only way to contact the customer service department is to make a phone call. the number listed would result in long distance charges to your phone bill. which issue should be addressed by the company to keep its crm in line with your expectations?

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?