1. Tradeoffs when reducing economic exposure. When an MNC restructures its operations to reduce its economic exposure, it may sometimes forgo economies of scale. Explain.
2. Exchange rate effects on earnings. Explain how an MNC's consolidated earnings are affected when foreign currencies depreciate.
3. Hedging translation exposure. Explain how a firm can hedge its translation exposure.
Limitations of hedging translation exposure. Bartunek Co. is a US-based MNC that has European subsidiaries and wants to hedge its translation exposure to fluctuations in the euro's value. Explain some limitations when it hedges translation exposure.