Use cash flow or fair value hedge accounting

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Reference no: EM132029009

1. An 8 year project is estimated to produce a product with the following information: 6) selling price = $80 per unit; variable costs are $65 per unit; fixed costs are $20,000; required return is 10%; initial investment = $200,000. Calculate the financial break-even.

2. If your pay is based on your company’s net income (e.g., bonus, commission, etc.), would you prefer that your company (1) hedge foreign currency transactions using forward contracts or options, and (2) use cash flow or fair value hedge accounting? Why?

Reference no: EM132029009

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