Aspen Tech case study

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Aspen Technology,Inc.: Currency Hedging Review History and Overview • Specialized in the development of simulation software for customer in process manufacturing industries • Advanced System for Process Engineering (ASPEN) project conducted at the Massachusetts Intitutes of Technology (MIT) in Cambridge Massachusetts, from 1976 to 1981 • Founded in 1981 by Dr. Larry Evans, a professor of chemical engineering at MIT • Larry Evans"leadership in the development and application of integrated systems for modeling, simulation and optimization of industrial chemical process History and Overview • In 1982 its first year of operations, AspenTech lost USD565,000 on sales of USD182,000 • Over next 13 years AspenTech’s…show more content…
Foreign Exchange Risk – – – – sell software in local currencies installment from three-to-five years creates foreign exchange exposure exchange rate fluctuations 52% revenue generated from foreign company with following revenues figures: • • • • Europe 31% Asia 12% Other countries 9% In United State 48%. Risk exposure are might be applicable : – – Transaction Exposure (High) most the costumer operated outside of US Translation Exposure (Low) convert foreign currency financial statements into a single currency (USD). Risk Exposure 2. Interest Rate Risk (low) – AspenTech debt using US dollar currency fix interest rate and mid term (3years) – place a seasonal line-of-credit facility with a New England Bank Risk Exposure 3. Credit Risk – Credit risk (default risk) in high exposure level • • • – 2 sources probability trigger this risk: • • 4. growing rapidly customer choose to defer payment of their license over the life of the contract Ex: AspenTech was liable for $ 4,6 million of this amount under limited recourse agreement
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