1. 1 Voyages Soleil Dr. Greco Finance 570 Presented by: Chao Jiang Jungho Park Prabhu Palanisamy Robert Prime Vernace Wong

2. 2 Agenda Canadian Tourism Industry Company Background Case Details & Issues Alternatives & Decision Criteria Assessment Recommendation Q & A

3. 3 Tourism The activities of a person outside his or her usual environment for less than a specified period of time and whose main purpose of travel is other than the exercise of an activity remunerated from the place visited. Chadwick (1994)

4. 4 Tourism Three different types of tourism Inbound international tourism Outbound international tourism Internal tourism

5. 5 Canadian Tourism Industry Tourism is big industry in Canada Average growth rates > 8% Total spending in 2007 Most Popular Travel destination for Canadians is the USA

6. 6 The Company Voyages Soleil Since 1975, Quebec, Canada Expertise/ focus

7. 7 Case Details Who: Jacques Dupuis, President and Owner of VS What: Measure for foreign payment obligation Why: Foreign exchange risk When: 6 months later How: Hedge/No hedge the AP

8. 8 Basic Issue IMPORTANCE URGENCY LOWHIGH LOW Fear of Terrorism Canadian Stock Market HIGH Interest Rate DeclineExchange Rate Risk

9. 9 Immediate Issue IMPORTANCE URGENCY LOWHIGH LOW Market ShareUpcoming Sales HIGH Pricing the tour packages Foreign Payment Obligation

10. 10 ECONOMIC CLIMATE TIMING OF THE PAYMENT PAYMENT IN FOREIGN CURRENY FLUCTUATING/ VOLATILE RATES FOREIGN EX-RISK Cause and Effect

11. 11 Alternatives Do Nothing Forward Contract Borrow and Invest

12. 12 Decision Criteria Cost Benefit Risk

13. 13 Alternatives Assessment Alternatives Decision Criteria CostResult / BenefitRisk 1. Do NothingNone Scenario 1: No change in Spot rate Payment = $95.27 Million Scenario 2: Cdn$ depreciates Payment = >$95.27 Million Scenario 3: Cdn$ appreciates Payment = <$95.27 Million Hi 2. Hedge via Forward Contract LowPayment = $ 95.68 MillionNone 3. Borrow Cdn$ and Invest in US$ HighPayment = $ 95.76 MillionLow

14. 14 Option 1 – Do Nothing Scenario 1 - Canadian dollar depreciates in the next 6 months Ex-Rates (US$/Cdn$)0.62980.62000.61500.61000.60500.6000 A/P in US$ (million)60 A/P in Cdn$ (million)95.2796.7797.5698.3699.17100.00 Scenario 2 - Canadian dollar appreciates in the next 6 months Ex-Rates (US$/Cdn$)0.62980.63960.64460.64960.65460.6596 A/P in US$ (million)60 A/P in Cdn$ (million)95.2793.8193.0892.3691.6690.96

15. 15 Option 2 – Forward Contract Assuming the Forward rate is accurate (F-S)/S x 12/6 x 100 0.857% discount will be assessed on the contract $95.68 Million in Canadian dollars

16. 16 Option 3 – Borrow and Invest US $ 60 M Oct 01 4 Bank Borrow at Int rate 2.70% 1 CN $ Purchase US$ at $0.6298/CN$ 2 US $ Apr 01 Interest Rate 1.65% 3

17. 17 Option 3 – Borrow and Invest US $60 M By Oct 01 1 US $59.51M Apr 01 Interest Rate 1.65% 2 Cdn $94.48M Purchase US $ at $0.6298/Cdn$ 3 Bank Borrow at Int rate 2.70% 4 Cdn $95.76M 5 FV at 2.70% Int. Customer s 6

18. 18 Recommendation Choose option 2 Employ forward contracts for all of the payable, locking in the Canadian Dollar price. Six-month forward rate at April 1, 2002 is 0.6271 US$/Cdn$ Canadian Dollar needed in October 2002 is Cdn$ 95.68

19. 19 Questions

20. 20 Backup Slides

21. 21 Exhibit - 1

22. 22 Exhibit - 2

23. 23 Exhibit - 3

24. 24 Exhibit - 4

25. 25 Exhibit - 5

26. 26 Exhibit - 6

27. 27 Exhibit - 7

28. Truly last slide