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1.) Motives for forecasting: Explain corporate motives for forecasting exchange rates.
There are several decisions which can be made with the help of better exchange rates. Every organization is increasingly spreading operations across different parts of the world and an estimate of the exchange rate would help them to estimate their costs and revenues in a better manner. This can also affect the timing decisions and other decisions such as hedging, short-term investing and financing, earnings assessment, long term financing and capital budgeting decisions. For example, if an American entity has to make payment of $1 million Euros after 6 months, but there is the possibility that the Euro would appreciate, the US entity would face losses since it would have to give more number of US dollars to get the Euros....
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