Case Study: Nodal Logistics And Custo Brasil
During the in-class discussion, you might want to contribute by showing charts and/or graphs related to your analysis for extra credit. If so, please bring printed material to class, we can just use the visualizer.
The assignment For this case, I would like you to: 1) Briefly summarize the case, with an emphasis on the currency risk faced by Nodal. 2) Describe and analyze the difference risk-management techniques discussed in the case: a. Remain uncovered b. Forward contracts c. Put options d. Risk-sharing agreements e. Money-market hedge (also called a “balance sheet hedge” here) f. Cross-currency swaps
g. Other ideas you might have You should develop some framework to compare the expected present value of US$ net income under each one of these risk-management techniques. You need to make some assumptions – please state those. But you also need some forecast of exchange rates; let’s assume there are four equally plausible exchange rate scenarios: 1) The exchange rate stays the same; 2) The exchange rate follows the EIU forecast given in the case; 3) The exchange rate depreciates by 5% every year; 4) The exchange rate appreciates by 5% every