Doziez

1. Should Dozier Industries hedge the forex risk?

2. What are the alternatives available to Dozier hedge the risk?

3. Evaluate the alternative hedging approaches available and recommend the best hedging approach given the facts of the case.

Dozier *****

1. ***** rate ***** bid

Dozier Industries set the basis for ***** international contract which posed both *****, as well as risks. In terms of *****, the contract opened the door to international expansion, but it posed the risks of fluctuating exchange rates. The price set for the contract was of 594,000 GBP, ***** it included a 6 percent profit margin; it was also based on the costs of ***** project and the bids made by the competition. The exchange rate ***** the ***** was of 1 GBP = 1.41 USD; ***** Great British Pound had been registering a trend of devaluation throughout the past six months, and the ***** team ***** Dozier feared the financial consequences of a continued devaluation.

The resolution to this problem comes ***** the ***** of hedging operations. ***** aspect of the ***** aimed to protect a company against the risks of conducting international ***** refers to the establishment of a fixed ***** rate ***** the ***** currencies of the ***** parties. Such an ***** protects the parties against facing losses due ***** currency *****, but it also implies that ***** the ***** rate modifies in their interest, they will ***** benefit from the financial gains ***** by the modifications.

Keeping in ***** the specifications from *****, as well as the items ***** in ***** establishment of the ***** bid, ***** Industries should set ***** contractual exchange rate at 1.41 dollars per *****. This ***** ensure ***** they still register the profits estimated at this time and they ***** also protected against the potential ***** (which ***** alarming ***** the ***** devaluation tendency of the GBP). Another benefit of this ***** rate is that ***** is justifiable to the American party, which also protects...