If a US-based company that imports and exports goods, is expecting to have a cash outflow amount
Question:
If a US-based company that imports and exports goods, is expecting to have a cash outflow amount of GBP 4,250,000 and the transaction date is said to be on November 30, 2022 Taking into consideration, that there are many different hedging strategies that exist to manage foreign exchange risks and currency risks, how much will the cash outflow of the company be (in USD) if they choose to:
1. Remain unhedged
2. Use Money Market Hedge
3. Use currency derivatives such as futures to hedge
4. Use currency derivatives such as forwards to hedge (Forward Hedge)
5. Use currency derivatives such as options to hedge
6. Hedge using currency swaps
Also, after having done the calculations to derive different cash outflow amounts of the company (in USD) given the different hedging strategies, which of the above hedging strategies is the best choice for the company to undertake and why is it the best choice?
Note - For the calculations using different hedging strategies, kindly include screenshots from where the used accurate rates were taken from, as well as website links for any and all sources of secondary data and information
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher