Suppose that Cleveland Co. engages in international business, with transactions denominated in four different foreign currencies: the euro, theCanadian dollar, the Australian dollar, and the Mexican peso. The company wishes to measure its cash flows in a single currency, the dollar, over thenext quarter.The following table shows the total cash inflows and outflows for each currency, along with the expected exchange rate for that currency.For each row in the table, enter the net inflow or outflow in that currency for the MNC. Then, enter the dollar value of that inflow or outflow in the lastcolumn of the table.TotalInflow(Millions)30 eurosNote: Remember to enter a negative sign if a value is negative.CurrencyEuroNet Inflow orOutflow(Millions)TotalOutflowExpected Exchange(Millions)RateNet Inflow or Outflow, InDollars(Millions)15 euroseuros$1.20Canadian Dollar$C30$C20C$$0.90+AAustralian Dollar$A10$A20A$$0.50Mexican peso20 pesos30 pesospeso$0.10+A$

To get the net inflow or outflow, simply subtract the net outflow from the net inflow. On the other…

Answered: Suppose that Cleveland Co. engages in…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following table shows the net cash flow for each currency for Cleveland Co. Total Inflow Total Outflow Net Inflow or Net Inflow or Outflow, In Outflow (Millions) Expected Exchange Rate Dollars (Millions) Currency Euro (Millions)(Millions) 30 euros Canadian Dollar $C30 15 euros 15 euros $C20 C$10 Suppose that the euro and the Canadian dollar are both highly correlated. $1.20 18.00 $0.90 $9.00 All else equal, this positive correlation means that the MNC is likely subject to a degree of transaction exposure.
Peter Sheffield has Euros (€) amounting to €500,000 and is provided with the following quotes: Bank A: Euro/US dollar = €0.8418/$ Bank A: British pound /US dollar = £0.7538/S Bank B: British pound/Euro = £0.8863/€ Determine whether an arbitrage opportunity exists. Show your calculation in the space below and briefly explain (in one or two sentences) why the arbitrage opportunity exists or not. For example, show your calculation as follows (The currencies used in the example are not applicable to your calculation. It just provide you with information how you should show your calculation): Yen/ZAR = 11.7654/1.3954 = 8.4316 (Round your answer to 4 decimals) Reason why arbitrage opportunity exists/ does not exist:
Consider Hurd Co., a U.S.-based MNC that wishes to analyze its economic exposure with respect to the British pound. The firm is comprised of three major business units: Unit A, Unit B, and Unit C. Each unit conducts international transactions in pounds. Hurd gathers data on percentage changes in the cash flow of each unit, changes in the total cash flow of the company, as well as the change in the value of the pound over the last 12 quarters. A small subset of the data set is shown in the following table, with many of the observations omitted for brevity. % Change in Unit % Change in Unit % Change in Unit % Change in Total % Change in Quarter A's Cash Flows B's Cash Flows C's Cash Flows Cash Flows Value of Pound 1 -2 1 3 2 1 2 -1 0 2 1 4 12 3 0 1 4 -3 Hurd uses the data to estimate the following regression equation. PCF₁ = ao + a₁ (PCP₁) +µt Where PCF is the percentage change in the cash flows of the company at time period t (column 5 in the table), and PCP, is the percentage change in…
Suppose that a commercial bank's current quote for transactions involving the United States dollar is A$1.3214 A$1.3298. (a) State the ask and bid prices for the bank. (b) Calculate the bid/ask spread for the bank.
Voltac Corporation (a U.S. company located in Charlotte, North Carolina) has the following import/ export transactions denominated in Mexican pesos in 2017:Currency exchange rates for 1 peso for 2017 are as follows:For each of the following accounts, how much will Voltac report on its 2017 financial statements?a. Inventory.b. Cost of Goods Sold.c. Sales.d. Accounts Receivable.e. Accounts Payable.f. Cash.
A company makes an export sale denominated in a foreign currency and allows the customer one month to pay. Under the two-transaction perspective, accrual approach, how does the company account for fluctuations in the exchange rate for the foreign currency?
Suppose that Nevada Co., a US-based MNC, makes regular, monthly purchases of materials from a German supplier named Spicurity. These regular payments are typically in the amount of 250,000 euros. Last month the exchange rate was $1.44 per euro. Nevada Co. only has cash reserves in dollars, while Spicurity only has cash reserves in euros. Suppose both companies use the same bank. In order to conduct this transaction last month, Nevada Co. required $ transaction reduced Nevada's account by this amount, denominated in dollars and credited it to Spicurity's account. 360,000.00 to pay for the materials. Thus, the bank handling the The bank then converted this amount to M
ASSUME THAT THE LOCAL CURRENCY UNIT IS THE FUNCTIONAL CURRENCY. Cade Inc. had a debit adjustment of $6400 for the year ended December 31, 2019, from restating its foreign subsidiary's accounts from their local currency units into U.S. dollars. Additionally, Cade had a receivable from a foreign customer. It is denominated in the customer's local currency. On December 31, 2018, this receivable for 300,000 local currency units (LCU) was correctly included in Cade's balance sheet at $121000. When the receivable was collected on February 15, 2019, the U.S. dollar-equivalent was $123800. In Cade's 2019 consolidated statement of income, how much should be reported as foreign exchange gain/(loss) in computing net income? BE SURE TO TYPE A SIMPLE NUMBER WITH NO COMMAS OR DOLLAR SIGNS. FOR EXAMPLE, TYPE 1000 INSTEAD OF $1,000. IF THE NUMBER IS NEGATIVE, TYPE -1000 INSTEAD OF ($1,000) Your Answer:
Assume the following to be a portion of the simplified balance of payments statement for a hypothetical country. The values are given in billions of dollars. Exports Imports Capital Outflows Capital Inflows $900 - $675 - $225 $135 If the central bank has not changed its holding of foreign-currency reserves during this period, then the capital-service account for this country should be equal to billion.
Honesty Company is a Philippine company in Taiwan. Honesty’s functional currency is the Taiwan dollar (TWD). The following exchange rates were in effect during 2022 (see image below).Honesty reported sales of TWD 1,500,000 during 2022 and had accounts receivable of TWD 280,000 as of December 31, 2022. Answer the following subquestions: a. How much is the amount of Accounts Receivable to be included in the consolidated financial statements? b. How much is the amount of Sales to be included in the consolidated financial statements? _______________ thanks!
Suppose you work at the FOREX desk of a multinational bank. No particular country is the home country for you as your responsibility is to conduct foreign exchange trade in whichever way is profitable for the bank. Using this as your guideline, consider the following data: S0 = ¥92/US$ S180 = ¥92/US$ IUS = 2% per annum IJapan = 0.09% per annum With a starting amount of US$10 million or its Yen equivalent, can you make a UIA profit? What if a CIA was conducted at F180 of ¥90/US$? What are your observations?
The Simpson Corporation is calculating their adjusted balance sheet into U.S. Dollars. The exchange rate at the beginning of the year was $1 Euro = $1 U.S. dollar. The current exchange rate is .80 Euros to $1.00. Net Income for the year was zero. How much is the accounting gain/loss due to the exchange rate change? Beginning Balance Sheet: Assets = 3,000 Euros Equity = 1,500 Euros Liabilities = 1,500 Euros Multiple Choice $375, loss $375, gain $500, loss $125, gain $500, gain

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