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Duke Inc. is a major exporter of spicy American cheese products. Duke’s financials are the following:...

Duke Inc. is a major exporter of spicy American cheese products. Duke’s financials are the following: Enterprise Value is USD 15 million; total net debt is 4 million out of which USD 3 million are EUR denominated net debt; Assume that FX business exposure to the EUR is 1.80. Duke also has a short position on a 5-year fixed-for-fixed USD/EUR swap with a notional of USD 2 million (assume this is an at-market swap). What is the FX equity exposure of Duke Inc.?

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Answer #1
Enterprise value (USD mn) 15.00
Debt (USD mn) 4.00
Equity (USD mn) 11.00
FX exposure ratio 1.80
Total exposure in value (USD mn) 8.33
EUR dominated net Debt (USD mn) 3.00
EUR dominated net Equity (USD mn) 5.33
FX Equity Exposure 2.0625
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