Please write one paragraph below demonstrating:

Decide on a hedging strategy recommendation for the TravelAction business

Write one introductory paragraph which has only 6 sentences

1st sentence: In one sentence state the issue

2nd sentence: discuss the issue

3rd sentence: continue discussing the issue

4th sentence: continue discussing the issue

5th sentence: continue discussing the issue

6th sentence: state your recommendation for the TravelAction business (This is your Topic or Thesis Statement)

Introduction Sarah Jones, Vive President and Tresurer af Traveliction Tne., is returning frum a short beach vacation with her family and jagging quickly the excalator to her Manhatlan offoe. The business planning cycie lucens aheai, making the summer vasation periud seam like a distant memnry. The date is Septemher 15,2022 . The 2023 Financial Plon needs to be finalized by the end of the month. The Plan, compiled by basiness management, will provide a view of all revenues, costs, and resulting basiness profits within the business of Travel.Action Inc. in 202.i. Mansgement will be boid acocuntable fur achieving these resuits: rearanded with good bomuses an achiering the Plan or punished aith no banuses fur underperfonming the Plan. Sarah and her measury team have the responsihility to identify and recommend hos to manage the foreign exchange exposures within the Plan, cue to the concern that potential lnses from these exposures could lead to underperformance. In prior years the Plan foreign exchange exposures were left unmanaged, hut in this planning cycle the company is considering using derivatives or ixher tnols tn manage the expasures. International financial markets are currently volatile. Fareign exdiange rates mpidly rise and fall to new levels on events such as Brexit and the Covid crisic, causing exoomic impacts on international husinesses. TruvelAction Inc. is a company based in the USA, and primarily owyat by LS insestors, so the business plannibg and reporting is in LS dolners, tur the activity of the business repuires boying sabstnntial nomos of foreign curreney, spexifically, earo, As a recent cramap company, with limited experience operating in inremaripal markers, the company experiences large foreign exchange surprises in the company's nehual reported resulte. Semh kwows that the significant fluctuntions in eurs exclange rotes in 2023 could dmanaticnlly impact the husiness resalss. The forecast of foreign exchange costs and revenues, if any, in the Plan will he onnverted to US dollars in the Plan hy using inrward exchange nures, hut the actasl exchange rates in the future will likely be very different than ahat is assumed in the Plan, which can result in galbsrantial gains and losses in acmal eompnny finnncial resplts. Managing these FX exposures using derivntives could reduce or eliminate the impacts of foreign exchange on the actual compony financial resalts. One of the benefite of this approach is that it allows the husines: marzgement to focus ou fundamental husiness zetions to drive th succesffal basines operarional results. Anocher henefit of hedging is that hedging can help lesd to more clear financial sratements that are zneluttered by pains of ka5ses from unplanned and aneoncrol able movements. in fareign exehange rate5. Failing to hadge cnn lend to the simntion where a larpe gain from foreigh exchnoe flucruntions can seem to elagect strong lasines opemarional performance, or conversely, a large lass from foreign exchange flucharions cen seem to suggest week batinese operntional perfonmonce, even thaugh in horh of these czses the gains or lasses are due tn fitabeid racker impects rather than operatiocal performanec of manager. Nor all members of the managenent ream believe that the company shoald hedge the foreips exchnnee expasures. Some of the key members of the manapement ream have the viea rhar the fusture movements in exchange rares will likely help the byasiness results, and rherefore Has. could easily lead to tad oukoanes, and berserere sbould be agyressirely mandgod. In agroencul wilh tbose tisk adverse namagers nho are coacxexal aboul the volatility, Satsh aims to develop a sonvencins plac to bedge tbe ceposurs. Elientive bodgiag wall eliminate the uncertainly caused by the polentially large, unoxpecied saings in rales. Sarah does nol bave exporienio managing loceign exchange exposseres, and she has hired you| to put logether a propasal lie bow to bes. manage the exposures. This might inclucie taing Uetivatives such as options, torwards, of a connbination ol optiocis and liorsands, en any ulber hediging tnols or strategies, including ain-derivaive strategies. Sarah and her treasuy team are cuncerned about foreign exchange transaction exposures, as well as ather types of larvign exchange ecunomie expesures in the Plan. Surah avould like to see your revummendativas presented within a lormal pusition paper. Description of the TravelAction Inc. Business The business of Travelaction Lnc. is the application of 300 -dearec canera and gla 58 ses rechnology to provide low-xast intervarional vacatioe experiences fox poople withont baving to lenve home. People who hnve physical, financial, or time resrictions which present them from busting a llight and plysically ttaveligg to a vatatiod destinatoon can pul vil the apecial Traved Action 36-depree visice glasace aud have a travel expcticane that da like teed bite cepericnec. Iles 36ll-depree filming treliology of TraselAction Lne. allors viewers to turs with their glesses and look in aby direction crentivg an experictece that is in the viewer's control, abd vastly expanding beyoed the one-dimensional erperienee of tenditional TV travel rideos In addition, tbe vilues have a ceriain amoual ol inledelivity in which the vicwse hs chwoss sbout wheca palleways to peurae widhin tbe saxation expericnee. A key sitalegy ol TravelActeon les. is to cibploy creative illucucers ftom Youlube to salaties brised direetly on the number of sabseribers they collect. These salacies paid to ialluencers are the valy liveign currency expasure ol Travelfetion Inv. Oae of the must sexcesslial inlluencers is a 20 -year-old frobca woman namod Amelie Blamehet whe is respoesible tor all TravelAction Ince travel evenls in l'aris, Fracos Anclie's popularily is largely due col oaly to ber lia tand boxczy bumof, but also to ber crealivity in laking bet chess touramenents, Parisian lishion sbows lior pels, and uther, seanelimes quirky, events around town. Her lalest travel event. loor her subscribers is a historital war of eighl Paris bars leat have had an hislurical inpact on French culture, and French well-known socklails. The lin twist is bas. lbe vour from tar to bat is on bikes! Subscribers are irviled to prepses several lypes of Urinks belios viewing to dtink. widh bet along de way, and if they follow bet instructivens, the inish the tour in a very relaxed cunditiun. Lise other travel events uI Amelie, the bike tour includes svenex laking plave arvemd ber that could only be seen by looking right or lell ur beind, like the stary stray dog thal chases Anselie and the subscribers, or the small "llying laxi" vo the righl side thal is noving yuiekly on the Seine River va loi] water wings that raise the walec laxi up in dhe air. In additiva lo Paris, vleve inllokacers are localed in Anselerdain, Alburs, Barcelons, and Venive. The larget subweriber market are US cuslumers who gay in US wollars, bul there are plams are to expand to uthur subeserber markets ant cutencies, as well ax plans to expand to mure vatalion ues:instiuns uutside of the eurooone. But an examination of the Plan Jer 2023 shesar the 2023 eash flow exposures are only to the euro salaries of the creative inlluencers. For example, ald the 2023 revenue lioun subecriplions and ads is in US collars. This inclueves ad revenue from product placements such as placing Cake in the hand of an influencer, and having the influencer offer a Coke to the suhseriher. All the overhead and other cuss in 2023 , except sur the euro salaries, are in US sollars as well. The only foreagn certency expesure expoessed by: management in the 2023 Plan casd llems are the eurs salaries is the ireative inlluencers, bel this cuuld chanse in fulure years. Travel Action Inc. Financial Information infiuenceas ano suascriaers Influpreers: - Number of influencers: 5 tatal (ane in each af the cities: Amsterdam, Athens, Barcelsna, l'aris, Venice: - Influencer annual salary: 12.5 Furos for each subscriher per year, and each infiuencer has an average of 4,000 suhecribers Subscribers: - Cost of annual subseriation for nach subscribor: $300 - Farecast in Plan of the number of subseribers: 20,000 subseribers EXCHANGE RATES AND HEDGING INSTRUMANTS - Average euro forward fate for sectement in 2023$1.09 per euro - Historical analyais suggests with 55% confidence that the actual euro FX rate in 2023 could be anywhere from 0.87 to 1.31 - Cost of burying or selling Eure forward =0 - Last of buyging a euro put or call with the strike set at tho forward rate - $20 for every $1,000 worth of euro that is hedged =24 of $ amount af hedged ZOZG PLAN: DECEMAER HALAMCE SHEET LWDUTIES AND EQUIT ZOZ3 PLAN! ANNLIAL CASH FLOWS