1. How will Blades be negatively affected by the high level of inflation in Thailand if the Thai customer renews its commitment for another three years?

2. Holt believes that the Thai importer will renew its commitment in two years. Do you think his assessment is correct? Why or why not? Also, assume that the Thai economy returns to the high growth level that existed prior to the recent unfavorable economic events. Under this assumption, how likely is it that the Thai importer will renew its commitment in two years?

3. For each of the three possible values of the Thai baht and the British pound, use a spreadsheet to estimate cash flows for the next year. Briefly comment on the level of Blades’ economic exposure. Ignore possible tax effects.

4. Now repeat your analysis in question 3 but assume that the British pound and the Thai baht are perfectly correlated. For example, if the baht depreciates by 5 percent, the pound will also depreciate by 5 percent. Under this assumption, is Blades subject to a greater degree of economic exposure? Why or why not?

5. Based on your answers to the previous three questions, what actions could Blades take to reduce its level of economic exposure to Thailand?