Question: Assessing Transaction Exposure Your couployer, a large MNC , has asked you to assess its transaction exposure. Its projected cash flows are as follows for

Assessing Transaction Exposure Your couployer, a large MNC, has asked you to assess its transaction exposure. Its projected cash flows are as follows for the next year: Danish krone inflows equal D)K.30,000,000, while outflows equal DK 40,000,000; are priced in pesos. Once material is received from a source, it is quickly used to produce the product in the United States, and then the product is exported. Currently, your firm has no other exposure to exchange rate risk. You have a choice of purchasing the material from Canada (denomi-nated in C$), from Mexico (denominated in pesos), or from within the United States (denominated in U.S. dollars). The quality and expected cost are similar across the three sources. Which source is preferable, given that you prefer minimal exchange rate risk?

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