International Finance: BMW: Currency Hedging 2007

Topic: International Finance: BMW: Currency Hedging 2007
Paper instructions:
Case Analysis

The detailed analysis of the case should start with a one-half page
executive summary with the issue and the major recommendations. It will
then include an introduction, where the students illustrate the problem
faced by the firm and its background, a main section that will provide
the details and evaluate the alternatives, and a conclusion with the
specific recommendations. For each case, I will provide a few questions
to help with analysis. However the write up should not be limited to
answering such questions. I expect the reports to be 8 pages (double-
spaced, 12 point font) maximum, excluding the summary, tables and graphs.
Supporting tables, spreadsheets and graphs (the exhibits) are limited to
10 pages. The exhibits should be referred to in the text of the paper as
they are needed to support the argument being made. Exhibits that are not
needed should not be included and all exhibits should be referenced in
the paper.
The case can be found here:
http://educompcentrallibrary.files.wordpress.com/2012/11/hrvd-bmw-
currency-hedging-2007.pdf

Questions to be answered in the case
• How would you evaluate BMW’s transaction and economic exposure?
• What do you think of BMW’s hedging strategy?
• Would you consider a range of 1.15 to 1.17 USD/Euro to be an
appropriate equilibrium rate? How would you forecast future exchange
rate?
• According to BMW’s net exposure and its hedging strategy, how big do
you think the impact of currency fluctuations is on profits and its stock
market value? How would you quantify it?
• BMW likes to follow a natural hedging strategy for its operations.
How can this strategy help the firm in minimizing its USD exposure?

WE ACCEPT