SALEM Manufacturing Essay Example | Topics and Well Written Essays - 250 words

SALEM Manufacturing - Essay ExampleSince capital of Oregon is expecting a minimum acceptable margin sale expenditure of 1,500,000 dollars and if the expected exchange rate of $1.56 per British pound goes below $1.50 per British pound, this would end up in a loss on capital of Oregons side which is not desirable and moreover such a fake can increment the tax burden too. The option of Money selling hedge would also prove us do by for the same reason as explained above. By locking the British pound transaction in dollars, the company can also suffer losses as dollar value goes down per British pound. The Options marketing hedge will do no better than the previous strategies when the results are considered. Offsetting the British pounds and waiting for the price to be favorable would be risky in this scenario. So the best option among those we have is to go on Unhedged. This is considered to be the best strategy as in this method Salems exposed substance of $1,500,000 is subjecte d to the movements of the relevant exchange rate. In several cases of this kind, the unhedged strategy has worked better to the hedge strategies yielding safe results. The hedge strategies usually work with special cases that come with biased conditions.