Case-in-brief - Chapter 6 - Argentina Currency DevaluationYour company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued.It wants to examine two scenarios: one where the currency drops 15% and one where it drops 25%. Currently, the exchange rateis 92 pesos (ARS$ 92) to 1 US dollar (US$1).Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage.Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos)Unit SalesManufacturer SalesCostsGross MarginTotal MarketingUnitsARS%46325.9100%183.356%142.644%73.322%Contribution after Marketing69.321%QUESTION 2How much more sales revenue would be needed in Argentina to maintain your current contribution after marketing?Additional Manufacturer Sales in Argentine Pesos after 15% drop: 0.000Additional Manufacturer Sales in Argentine Pesos after 25% drop: 0.000

The objective of the question is to calculate the additional sales revenue needed in Argentina to…

Answered: Case-in-brief - Chapter 6 - Argentina…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2) A Canadian company sold 1000 computers for the price of $1000 CND to an Indian company when exchange rate was 1 CND= 65 R. invoice is due after 90 days and when Indian company is about to pay the invoice, exchange rate s 1 CND= 75 R. How much is the loss for Indian company? What are the methods to avoid this risk?
Without Using Excel: ABC Company wants to possibly expand its plant in Europe. The current spot exchange rate is for Euro is €0.83. The initial investment is €2.1, with projected cash flows for three years at €950,000. The discount rate is 10%. The risk-free rate in the US is 5 percent and the risk-free rate in Europe is 7 percent. Calculate the NPV of the project into US Dollars, rounding to the nearest cent, format as "XXX,XXX.XX"
An Omani firm has to make payment of 3 million INR to Indian Company after 30 days. Since the company exposing the risk of currency fluctuation so purchased the forward contract at OMR0.006279 = 1 INR. the spot rate after 30 days was OMR 0.006542/INR Which of the following will be the profit or loss to the firm, if they execute the forward contract? a. Loss of OMR 789 b. All the options are wrong c. Profit of OMR789 d. Profit of OMR 526 e. Loss of OMR 526
QUESTION It is 1 June, and DML Ltd. is anticipating payment of GBP100,000 to a British supplier in two months’ time. The spot GBPGHS exchange rate is currently GHS5.2110 – GHS5.2260 = GBP1. Pundits are suggesting that the cedi might weaken against the pound sterling in the coming months. The directors of the company are considering hedging against potential currency risk using either forward market transaction or money market transactions. Below are information relating to instruments in the two markets. Forward market (contract specifications): 2-month forward bid rate on 1 June: GHS5.2340 = GBP1 2-month forward ask rate on 1 June: GHS5.2490 = GBP1 Money market (annualized interest rates on 1 June): Investing rate Borrowing rate Ghana 24.0% 28.0% United Kingdom 2.4%…
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Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.4073 per Singapore dollar. You have just placed an order for 35,062 motherboards at a cost to you of S158 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $113 each. Calculate your profit if the exchange rates goes down by 14.51% over the next 90 days.
IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is #105/$ and the three-month forward rate is ¥100/$. The three-month money market interest rate is 8 percent per annum in the United States and 7 percent per annum in Japan. The management of IBM decided to use a money market hedge to deal with this yen account payable. a. Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation. b. Conduct a cash flow analysis of the money market hedge.
Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.3595 per Singapore dollar. You have just placed an order for 39328 motherboards at a cost to you of S146 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $118 each. Calculate your profit if the exchange rates goes down by 12.23% over the next 90 days. NOTE: Enter the number rounding to four DECIMALS. If your decimal answer is 0.034576
Given the following information, take advantage of the triangular arbitrage opportunity and calculate the US dollar profit for an investment of $1,000,000. Keep at least two decimals in your calculations and round at the very end to enter your answer with no decimals (i.e, if your final answer is 9.98, you will enter 10). Singapore dollar in US dollars (USD/SGD) 0.73 US dollars in British pounds (GBP/USD) 0.83 Singapore dollar in British pounds (GBP/SGD) 0.71
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The Japanese yen increases in value relative to the dollar, moving from 120 yento 110 yen to each U.S. dollar. From the perspective of a U.S. firm that produces in the UnitedStates and exports its product to sell in Japan:a. This is bad news.b. It doesn’t matter.c. This is good news
A1

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