Tesla Inc. (US electric vehicle manufacturer) intends to receive 375,000 in 3 months and is concerned that
Question:
Tesla Inc. (US electric vehicle manufacturer) intends to receive 375,000 in 3 months and is concerned that the exchange rate expectations over the next three months would affect their receivables adversely and wishes to hedge this risk. Given this scenario, please answer the following questions: (a) Identify the main financial risk faced by Tesla given the above scenario. Systematically review and critically evaluate research from a variety of sources to explain why you have identified this as a risk, and whether you would consider hedging. Please discuss in your answer the outlook for the underlying variable and cite evidence of an adverse and/or favourable direction. (b) For the risk, you have mentioned in part (a) please recommend a hedging strategy that is consistent with the outlook discussed in part (a) and explain why you have chosen this strategy above all others. Is there any chance you can help me with this? As I can't indentify the risk as it is already in the question. (the exchange rate)
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine