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6. What was the revenue actually received from the original order, and how does it affect the profitability of that order?
Baker Adhesives actually received 104,334.70 BRL, which was transferred to USD 45,573 using realized exchange rate 0.4368 US$/BRL rather than transferred to USD 48,370. From Exhibit TN1, we can see that based on the same estimated costs USD 44,500, less realized revenue USD 45,573 than expected revenue USD 48,370 would lead to a dramatic decrease in profit USD 2,796 (decrease from anticipated profit USD 3,870 to realized profit USD 1,073), which accounted for 72.26% of the anticipated profit.
The above decrease in profit is mainly due to mistakenly estimate expected exchange rate 0.4636 US$/BRL, meaning that for per unit BRL, Baker Adhesives can exchange US$0.4636. But instead, in reality, Baker Adhesives can only exchange US$0.4368 per receiving unit of BRL. The change in value of BRL is (5.78%).

9. Explain which hedge is to be preferred and why.
10. With the hedge in place, can the company be completely sure there will be no exchange risk?
Baker Adhesives was a modest adhesives company founded by Doug Baker’s father who was a chemist and believed in flexible production systems. Baker Adhesives recently sold 1,210 gallons of product to Brazilian company, Novo. Initially, this was thought to be a good idea for Baker Adhesives financially; however after factoring in exchange rates, this may not have been the case. In the original order, Novo was charged 104,338.30 BRL for their purchase. After the exchange of currency from BRL to U.S. dollars, Baker Adhesive was estimated to receive $48,371.24 (104,338.30 * .4636). This means that Baker Adhesive brought in $55,967.06 less from their deal with Novo than was expected. Since the exchange-rate risk was not researched, Baker Adhesive brought in less initially projected from their deal with

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