On December 1, 2016, Mosby, a U.S. company, sells goods to a German company, with payment of 300,000 euros to be received on March 1, 2017. Mosby also enters into a forward contract on December 1, 2016 to sell 300,000 euros on March 1, 2017. Exchange rates for the euro on various dates are as follows: Date Spot Rate Forward Rate (to March 1, 2017) December 1, 2016 December 31, 2016 March 1, 2017 $1.28 1.32 1.34 $1.26 1.30 N/A Assuming that Mosby designates the forward contract as a fair value hedge of a foreign currency receivable, what is the net impact on its net income in 2016 resulting solel from the fluctuation in the value of Euro? Mosby amortizes forward points on a monthly basis using a straight-line method. $2,000 decrease in net income. $12,000 increase in net income. $3,000 decrease in net income.

On December 1, 2016, Mosby, a U.S. company, sells goods to a German company, with payment of 300,000 euros to be received on March 1, 2017. Mosby also enters into a forward contract on December 1, 2016 to sell 300,000 euros on March 1, 2017. Exchange rates for the euro on various dates are as follows: Date Spot Rate Forward Rate (to March 1, 2017) December 1, 2016 December 31, 2016 March 1, 2017 $1.28 1.32 1.34 $1.26 1.30 N/A Assuming that Mosby designates the forward contract as a fair value hedge of a foreign currency receivable, what is the net impact on its net income in 2016 resulting solel from the fluctuation in the value of Euro? Mosby amortizes forward points on a monthly basis using a straight-line method. $2,000 decrease in net income. $12,000 increase in net income. $3,000 decrease in net income.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter1: Multinational Financial Management: An Overview

Section: Chapter Questions

Problem 6QA

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