This case study discusses the plight of the company whose cash flows are affected by exchange rate fluctuations. Pixonix Inc. is a Canadian company with accounts payable in the United States (USD). The currency price between USD and CAD has been beneficial for the company in the last couple of years. Due to recent analyst reports, CFO Cain expects depreciation of the CAD against the USD as this creates a threat for the company. With the strengthening of the CAD, Cain is considering hedging.
​Colette Southam; Karim Moolani
Harvard Business Review (908N13-PDF-ENG)
June 05, 2009
Case questions answered:
Run an analysis to see the impact of Cain, CFO of Pixonix Inc., on possible hedging strategies under different exchange rates.
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Pixonix Inc. - Addressing Currency Exposure Case Answers
Run an analysis to see the impact of Cain, CFO of Pixonix Inc., on possible hedging strategies under different exchange rates.
Pixonix Inc. is a Canadian company with accounts payable in the United States (USD). The currency price between USD and CAD has been beneficial for the company in the last couple of years.
Due to recent analyst reports, CFO Cain expects depreciation of the CAD against the USD as this creates a threat for the company.
CFO Cain could utilize two tools to hedge the uncertain future value of the CAD price. A 3-month forward or 93.5 Call Option on January 8th to buy USD could provide the help needed for the company to decrease the risk of the currency exchange transactions.
The reason I used the 93.5 Call Option to run the scenario analysis for Pixonix Inc. is due to the…
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