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38Textron Inc. Annual Report • 2013
Quantitative Risk Measures
In the normal course of business, we enter into financial instruments for purposes other than trading. To quantify the market risk
inherent in our financial instruments, we utilize a sensitivity analysis. The financial instruments that are subject to market risk
(interest rate risk and foreign exchange rate risk) include finance receivables (excluding lease receivables), debt (excluding lease
obligations), interest rate exchange agreements and foreign currency exchange contracts.
Presented below is a sensitivity analysis of the fair value of financial instruments outstanding at year-end. We estimate the fair
value of the financial instruments using discounted cash flow analysis and indicative market pricing as reported by leading
financial news and data providers. This sensitivity analysis is most likely not indicative of actual results in the future. The
following table illustrates the sensitivity to a hypothetical change in the fair value of the financial instruments assuming a 10%
decrease in interest rates and a 10% strengthening in exchange rates against the U.S. dollar:
2013 2012
(In millions)
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
Manufacturing group
F
oreign exchange rate ris
k
Debt $ (249) $ (275) $ (27) $ (564) $ (598) $ (60)
Foreign currency exchange contracts (12) (12) 33 6 6 34
$ (261) $ (287) $ 6 $ (558) $ (592) $ (26)
I
nterest rate risk
Debt $ (1,854) $ (2,027) $ (13) $ (2,225) $ (2,636) $ (9)
Finance group
I
nterest rate ris
k
Finance receivables $ 1,296 $ 1,356 $ 24 $ 1,766 $ 1,793 $ 36
Debt, including intergroup (1,256) (1,244) (4) (1,687) (1,678) (13)
$ 40 $ 112 $ 20 $ 79 $ 115 $ 23
* The value represents an asset or (liability).