SALEM Manufacturing Essay Example | Topics and Well Written Essays - 250 words

SALEM Manufacturing - Essay ExampleSince Salem is expecting a token(prenominal) acceptable margin sale price of 1,500,000 dollars and if the expected reciprocation rate of $1.56 per British jam goes below $1.50 per British pound, this would end up in a loss on Salems side which is not desirable and moreover such a hedge can increase the tax consequence too. The option of Money marketing hedge would also prove us wrong for the same reason as explained above. By locking the British pound transaction in dollars, the company can also suffer losses as dollar value goes down per British pound. The Options marketing hedge give do no better than the previous strategies when the results are considered. Offsetting the British pounds and waiting for the price to be favorable would be risky in this scenario. So the beat out option among those we have is to remain Unhedged. This is considered to be the best strategy as in this method Salems exposed amount of $1,500,000 is subjected to the m ovements of the relevant exchange rate. In several cases of this kind, the unhedged strategy has worked better to the hedge strategies yielding safe results. The hedge strategies usually work with special cases that come with biased conditions.