Accounting A chinese company offers an American buyer rice at US $2500 per M/T CFR New York, the buyer asks for unit price under CIFC5% New York. After checking with the insurer, the seller finds thst the All risks and the war risk rate are 0.5% and 0.04% respectively and the insured amount is 110% of the CFR price. What unit price should the seller quote in order to maintain the same margin?

Accounting A chinese company offers an American buyer rice at US $2500 per M/T CFR New York, the buyer asks for unit price under CIFC5% New York. After checking with the insurer, the seller finds thst the All risks and the war risk rate are 0.5% and 0.04% respectively and the insured amount is 110% of the CFR price. What unit price should the seller quote in order to maintain the same margin?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 11P: Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s...

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Boisjoly Watch Imports has agreed to purchase 15,000 Swiss watches for 1 million francs at today’s spot rate. The firm’s financial manager, James Desreumaux, has noted the following current spot and forward rates: On the same day, Desreumaux agrees to purchase 15,000 more watches in 3 months at the same price of 1 million Swiss francs. What is the cost of the watches in U.S. dollars, if purchased at today’s spot rate? What is the cost in dollars of the second 15,000 batch if payment is made in 90 days and the spot rate at that time equals today’s 90-day forward rate? If the exchange rate for is 0.50 Swiss francs per dollar in 90 days, how much will Desreumaux have to pay (in dollars) for the watches?
St. Philip Company ordered parts costing €100,000 from a foreign supplier on January 15 when the spot rate was $0.20 per €. A one-month forward contract was signed on that date to purchase €100,000 at a forward rate of $0.23. The forward contract is properly designated as a fair value hedge of the €100,000 firm commitment. On February 15, when the company receives the parts, the spot rate is $0.22. At what amount should St. Philip Company carry the parts inventory on its books?a. $20,000b. $21,000c. $22,000d. $23,000
Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 2,000,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 2,000,000 francs in three months. Maas selects a strike price of $0.79 per franc when the spot rate is $0.79 and pays a premium of $0.003 per franc. The spot rate increases to $0.794 at December 31, 2020, causing the fair value of the option to increase to $13,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.81, resulting in a fair value for the option of $40,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials.
Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,200,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,200,000 francs in three months. Maas selects a strike price of $0.68 per franc when the spot rate is $0.68 and pays a premium of $0.005 per franc. The spot rate increases to $0.686 at December 31, 2020, causing the fair value of the option to increase to $10,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.70, resulting in a fair value for the option of $24,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials. What is the overall impact on net income over…
Choose the correct. St. Philip Company ordered parts costing €100,000 from a foreign supplier on January 15 when the spot rate was $0.20 per €. A one-month forward contract was signed on that date to purchase €100,000 at a forward rate of $0.23. The forward contract is properly designated as a fair value hedge of the €100,000 firm commitment. On February 15, when the company receives the parts, the spot rate is $0.22. At what amount should St. Philip Company carry the parts inventory on its books?a. $20,000b. $21,000c. $22,000d. $23,000
Suppose that on June 5, a Japanese Yen future contract is purchased at the ¥ 123 per dollar (opening price). Contract is for $ 5,000. Initial margin level is 15% of the value of the contract, and maintenance level is %10 of the value of the contract. The future price is ¥ 120 per dollar on June 6. There will be 15% increase in future price on June 7 and 8% decline on June 8? What is the value of the actual margin at the end of the date June 8? (ASSUMPTION: As margin account reaches above the initial margin level, withdraw the amount above the initial margin level)
Torres Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 106,000 pounds, with delivery and payment to be made on September 20. On July 20, Torres purchased a two-month call option on 106,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $1.35 per pound and costs $1,060. The spot rate for pounds is $1.35 on June 20 and $1.40 on September 20. What amount will Torres Corporation report as an option expense in net income for the quarter ended September 30? Multiple Choice $530. $5,300. $2,300. $1,060.
Torres Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 100,000 pounds, with delivery and payment to be made on September 20. On July 20, Torres purchased a two-month call option on 100,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $1.25 per pound and costs $600. The spot rate for pounds is $1.25 on June 20 and $1.30 on September 20. What amount will Torres Corporation report as an option expense in net income for the quarter ended September 30?a. $300b. $600c. $2,000d. $5,000
Torres Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 100,000 pounds, with delivery and payment to be made on September 20. On July 20, Torres purchased a two-month call option on 100,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $1.25 per pound and costs $600. The spot rate for pounds is $1.25 on June 20 and $1.30 on September 20. What amount will Torres Corporation report as an option expense in net income for the quarter ended September 30? Choose the correct.a. $300b. $600c. $2,000d. $5,000
Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 marks on March 15, 2018. To hedge this forecasted transaction, the company acquires a three-month call option to purchase 1,000,000 marks on December 15, 2017. Leickner selects a strike price of $0.58 per mark, paying a premium of $0.005 per unit, when the spot rate is $0.58. The spot rate increases to $0.584 at December 31, 2017, causing the fair value of the option to increase to $8,000. By March 15, 2018, when the raw materials are purchased, the spot rate has climbed to $0.59, resulting in a fair value for the option of $10,000.a. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials, assuming that December 31 is Leickner’s year-end and that the raw materials are included in the cost of goods sold in 2018.b. What is the overall impact on net income over the two accounting periods?c. What is the net…
Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,500 cases of Oktoberfest-style beer from a German supplier for 390,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: Date Spot Rate Forward Rateto October 15 Call Option Premiumfor October 15(strike price $1.30) August 15 $ 1.30 $ 1.36 $ 0.05 September 30 1.35 1.39 0.06 October 15 1.38 1.38 (spot) N/A The company closes its books and prepares third-quarter financial statements on September 30. Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 390,000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for…
Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,000 cases of Oktoberfest-style beer from a German supplier for 200,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: Date Spot Rate Forward Rateto October 15 Call Option Premiumfor October 15(strike price $1.05) August 15 $ 1.05 $ 1.11 $ 0.05 September 30 1.10 1.14 0.06 October 15 1.13 1.13 (spot) N/A The company closes its books and prepares third-quarter financial statements on September 30. Assume that the beer arrived on August 15, and the company made payment on October 15. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase. Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 200,000 euros. The company designated the forward contract as a cash…