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Performance Evaluation and Foreign Exchange Risk in Brazil: The Case of Eastland Electronics
Lee Radebaugh, Brigham Young University
Monte Swain, Brigham Young University
ABSTRACT. The purpose of this case is to help students understand how foreign exchange can influence the budgeting process. It draws on a significant body of literature on the subject. This case is most effective when discussing a chapter on international budgeting and performance evaluation. The case discusses the actual budgeting process of a U.S.-based multinational corporation and focuses on the interaction between corporate management and management of Eastland’s Brazilian operations. From an organizational perspective, it shows how reporting lines exist between the Brazilian CFO and the Brazilian CEO and between the Brazilian CFO and corporate treasury. It discusses the different translation methodologies that the can be used and the one that Eastland actually uses. The case discusses the different ways to come up with a budgeted exchange rate (using a consensus forecast or a forward exchange rate) and then discusses how the rate can be applied in the budgeting process.
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