Q10.5. [Ch. 9] Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$ and the 90-day forward rate is $0.1242/Mex$. a. What is Disney's peso transaction exposure associated with this fee? b. If the spot rate expected in 90 days is $0.1305, what is the expected U.S. dollar value of the fee? c. What is the hedged dollar value of the fee? d. What factors will influence the hedging decision? Q10.6. [Ch. 10] During 1993, the Japanese yen appreciated by 11 percent against the dollar. In response to the lower cost of the main imported ingredients-beef, cheese, potatoes, and wheat for burger buns-McDonald's Japanese affiliate reduced the price on certain set menus. For example, a cheeseburger, soda, and small order of French fries were marked down to ¥410 from ¥530. Suppose the higher yen lowered the cost of ingredients for this meal by X30. a. How much of a volume increase is necessary to justify the price cut from 530 to 410 yen? Assume the previous profit margin (contribution to overhead) for this meal was ¥220. What is the implied price elasticity of demand associated with this necessary rise in demand? b. Suppose sales volume of this meal rises by 60 percent. What will be the percentage change in McDonald's dollar profit from this meal? c. What other reasons might McDonald's have had for cutting price besides raising its profits?
