Yomance Co. is a U.S. company that has exposure to Japanese yen and British pounds. It...

Yomance Co. is a U.S. company that has exposure to Japanese yen and British pounds. It has net inflows of 4,000,000 yen and net outflows of 50,000 pounds. The present exchange rate of the Japanese yen is $.010 while the present exchange rate of the British pound is $1.25. Yomance Co. has not hedged its positions. The yen and pound movements against the dollar are highly and positively correlated. If the U.S. dollar strengthens by say 5% how will this affect Yomance Co. overall cashflow? Will they be adversely affected or will they benefit? Explain with calculations.

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Expert Solution

Yomance Co. Will be benefite if US Dollar is strengthen by 5% as there will be overall reduction in cash outflw by $1,125

jeff jeffy answered 2 years ago

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