Pixonix Inc. - Addressing Currency Exposure

Colette Southam, Karim Moolani

Research output: Contribution to specialist publicationArticleEducation

Abstract

The chief financial officer of Pixonix Inc. is trying to decide if she should hedge, given the current strength of the Canadian dollar. Her company licenses proprietary software through a U.S. company that will cost $7.5 million in three months time. The case provides the students with the opportunity to understand the impact of exchange rate fluctuations on her firm's cash flows and some of the instruments available to manage risk, including puts and calls and forward contracts.

[Extract]
On Friday November 2, 2007, Mikayla Cain, chief financial officer of Pixonix Inc., sat in her office and pondered the impact of the strong Canadian dollar on her firm’s projected financial results. The Report on Business today stated that the Canadian dollar had hit another record, jumping to US$1.0717 from the previous day’s close of $1.0512 after a stronger-than-expected jobs report reduced the odds of an interest- rate cut. The Canadian dollar had already been the world’s best-performing major currency this year, increasing 25 per cent against the U.S. dollar and almost seven per cent in the past month alone. Cain knew she would have to understand the impact of the strong dollar on her firm’s cash flows and the tools available to manage the company’s currency risk.
Original languageEnglish
Number of pages4
No.9B08N013
Specialist publicationIvey Publishing [Case Studies]
PublisherIvey Business School
Publication statusPublished - 5 Jun 2008

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Currency exposure
Cash flow
Chief financial officer
Currency risk
Financial result
Forward contracts
License
Interest rates
Exchange rate fluctuations
Costs
Hedge
Currency
Software

Cite this

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Pixonix Inc. - Addressing Currency Exposure. / Southam, Colette; Moolani, Karim.

In: Ivey Publishing [Case Studies], No. 9B08N013, 05.06.2008.

Research output: Contribution to specialist publicationArticleEducation

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