Question 21.FSE.4: Iowa Co. has most of its business in the United States, exce...

International Financial Management

Iowa Co. has most of its business in the United States, except that it exports to Portugal. Its exports were invoiced in euros (Portugal’s currency) last year. It has no other economic exposure to exchange rate risk. Its main competition when selling to Portugal’s customers is a company in Portugal that sells similar products, denominated in euros. Starting today, it plans to adjust its pricing strategy to invoice its exports in U.S. dollars instead of euros. Based on the new strategy, will Iowa Co. be subject to economic exposure to exchange rate risk in the future? Briefly explain.

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