The chief financial officer of a fast progressing U.S.-based Software Company that trades its process-control software to engineering clients internationally must assess the aims, plans and rules of the company’s currency hedging design. This assessment is initiated by alterations in the company’s business, especially its purchase of a United Kingdom subsidiary, other increasingforeign expenses, and its present IPO.
AspenTech’s Estimated Cash Flows (‘000) by Currency, 1995
Risk Exposure by currencies
Govt. Interest Rate
Exchange Rate - US/Pound
Exchange Rate = US/Mark
Exchange Rate US/Franc
Exchange Rate US/Yen
Exchange Rate US/Dollar
Installments Receivables - Principal amount
Per year Equal InstallmentTotal Receivables
Total Receivables in US $ at spot rate
1. What are Aspen Technology’s main exchange rate exposures? How does Aspen Tech’s business strategy give rise to these exposures as well as to the firm’s financing need? Please make sure you catalogue the relevant exposures.
2. Calculate Aspen’s exposures by currency for the past year. What currencies is it long and short?
3. What goal would you recommend for the firm’s currency risk management program? Why? Based on your goal, what type of exposure should Aspen be measuring? Please make sure you provide your rationale in detail for your recommendation.
4. Should the firm maintain its policy of completely eliminating all exposure on booked sales? If not, what policy would you advocate and why? Please make sure you explain what evidence you employed to come to your conclusion.
5. How, if at all, should Aspen’s recent transition from a private to a publicly-traded firm affect its approach to risk management? Make sure your “forecast”: is linked to evidence from the case, evidence you derived from the analysis of the case, or other information.