Data for Question Assumptions Values Sales Volume per Year 900 US Dollar Price of Annual Subscription 240 Spot Exchange Rate (MWK$) 771.83 Expected Spot Rate (MWK/$) 1082.95 Unit Volume Decrease if Price in MWK Increased 45 % This is a US cloud meeting firm selling subscription video conferencing online to Malawian businesses. Using the data above, calculate under Same Malawian Kwacha (MWK); a)US dollar price of a single subscription. b)Unit volume of sales of subscription. c)US dollar sales revenue of all subscription revenues.

Data for Question Assumptions Values Sales Volume per Year 900 US Dollar Price of Annual Subscription 240 Spot Exchange Rate (MWK$) 771.83 Expected Spot Rate (MWK/$) 1082.95 Unit Volume Decrease if Price in MWK Increased 45 % This is a US cloud meeting firm selling subscription video conferencing online to Malawian businesses. Using the data above, calculate under Same Malawian Kwacha (MWK); a)US dollar price of a single subscription. b)Unit volume of sales of subscription. c)US dollar sales revenue of all subscription revenues.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 28QA

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Data for Question Assumptions Values Sales Volume per Year 900 US Dollar Price of Annual Subscription 240 Spot Exchange Rate (MWK$) 771.83 Expected Spot Rate (MWK/$) 1082.95 Unit Volume Decrease if Price in MWK Increased 45 % This is a US cloud meeting firm selling subscription video conferencing online to Malawian businesses. Using the data above, calculate under Case 1- Same Malawian Kwacha (MWK) Price and Case 2- Same U.S Dollar Price US dollar price of a single subscription. Unit volume of sales of subscription. US dollar sales revenue of all subscription revenues.
Cook Manufacturing (US): (Account Payable: Pay 10,000,000 Yen, 90 days from now) Spot rate : 100 Yen/$ Japan 3 month borrowing interest rate: 2.0% / 90 days Japan 3 month investment interest rate: 1.5% / 90 days How many USD will Cook Manufacturing convert into Yen today to pay the Japanese supplier 90 days from now.
A company offered to sell goods at “USD2000 per M/T CIF Toronto with all risks for 110% of the value” . The importer requested a revised quote for FOB Ningbo, The freight for Ningbo to Toronto was USD 50 per M/T, and the premium rate was 1%, to get the same export revenue,what are FOB price and CFR price?
Moyes has taken delivery of 50,000 electronic devices from a firm in Malaysia. The seller is in a strong bargaining position and has priced the devices in Malaysian dollars at M$ 12 each. It has granted Moyes 3 months’ credit. Malaysian interest rates are 3% per quarter. Moyes has all its money tied up in its operations but could borrow in sterling, its home currency at 4% per quarter if necessary. Exchange rate :Malaysian dollar per £ Spot : 5.4165 Three-month forward= 5.425 A three-month sterling put, Malaysian dollar call currency option with a strike price of M$ 5.425/£ for M$ 600,000 is available for a premium of M$ 15,000. Required: a) Discuss, with the help of calculations three hedging strategies available to Moyes.
Moyes has taken delivery of 50,000 electronic devices from a firm in Malaysia. The seller is in a strong bargaining position and has priced the devices in Malaysian dollars at M$ 12 each. It has granted Moyes 3 months’ credit. Malaysian interest rates are 3% per quarter. Moyes has all its money tied up in its operations but could borrow in sterling, its home currency at 4% per quarter if necessary. Exchange rate :Malaysian dollar per £ Spot : 5.4165 Three-month forward= 5.425 A three-month sterling put, Malaysian dollar call currency option with a strike price of M$ 5.425/£ for M$ 600,000 is available for a premium of M$ 15,000. Required: b) Weigh up the advantages and disadvantages of each strategy
Moyes has taken delivery of 50,000 electronic devices from a firm in Malaysia. The seller is in a strong bargaining position and has priced the devices in Malaysian dollars at M$ 12 each. It has granted Moyes 3 months’ credit. Malaysian interest rates are 3% per quarter. Moyes has all its money tied up in its operations but could borrow in sterling, its home currency at 4% per quarter if necessary. Exchange rate :Malaysian dollar per £ Spot : 5.4165 Three-month forward= 5.425 A three-month sterling put, Malaysian dollar call currency option with a strike price of M$ 5.425/£ for M$ 600,000 is available for a premium of M$ 15,000. Required: a) Discuss, with the help of calculations three hedging strategies available to Moyes. b) Weigh up the advantages and disadvantages of each strategy
Hans Brinker is assistant vice-president for marketing for Skagen Ice Skate Company (SIS). SIS does all of its own manufacturing in Denmark and then distributes worldwide through its sales office. World prices for foreign sales offices are set by the home office. Brinker is now setting the price list for all U.S. sales offices, and needs prices set for the coming year. The current spot rate is ?? = ???? $ = 5.6050, with a one-year forward rate of ?? = ???? $ = 5.5685. The one-year deposit rates for Danish krone and U.S. dollars are 1.5% and 1.35%, respectively. SIS’s best-selling professional figure skate, the Royal Silver Blade, is currently priced at $450 to U.S. retailers. Current inflation estimates for Denmark and the United States are both about 3%. SIS’s policy is to try to absorb about 50% of all exchange rate-induced price increases, but pass along 100% of all exchange rate price decreases if possible. The world skate business is competitive. Brinker phones you and explains…
Hithergreen Products is completing a new factory building in Canada and must make a final construction payment of C$28,000,000 in six months. Foreign exchange and interest rate quotations are as follows: Present spot rate: C$ 1.4000/US$ Six-month forward rate: C$ 1.4200/US$ Canadian six-month interest rate: 13% per annum U.S. six-month interest rate 10% per annum The financial manager’s own analysis suggests that in six months the following spot rates can be expected: Highest expected rate: C$1.4000/US$ Most likely rate: C$1.4300/US$ Lowest expected rate: C$1.4500/US$ Hithergreen Products does not presently have any excess dollar cash balances. However, it expects to obtain adequate cash from an income tax refund due in six months. Hithergreen’s weighted average cost of capital is 20% per annum. What alternatives are available for making payment, and what are the advantages or…
AshGold Products is completing a new factory building in Canada and must make a final construction payment of C$28,000,000 in six months. Foreign exchange and interest rate quotations are as follows:Present spot rate:C$ 1.4000/US$Six-month forward rate:C$ 1.4200/US$Canadian six-month interest rate:13% per annumU.S. six-month interest rate10% per annumThe financial manager’s own analysis suggests that in six months the following spot rates can be expected:Highest expected rate:C$1.4000/US$Most likely rate:C$1.4300/US$Lowest expected rate:C$1.4500/US$Ashgold Products does not presently have any excess dollar cash balances. However, it expects to obtain adequate cash from an income tax refund due in six months. Ashgold’s weighted average cost of capital is 20% per annum. What alternatives are available for making payment, and what are the advantages or disadvantages of each?
AshGold Products is completing a new factory building in Canada and must make a final construction payment of C$28,000,000 in six months. Foreign exchange and interest rate quotations are as follows:Present spot rate:C$ 1.4000/US$Six-month forward rate:C$ 1.4200/US$Canadian six-month interest rate:13% per annumU.S. six-month interest rate10% per annumThe financial manager’s own analysis suggests that in six months the following spot rates can be expected:Highest expected rate:C$1.4000/US$Most likely rate:C$1.4300/US$Lowest expected rate:C$1.4500/US$Ashgold Products does not presently have any excess dollar cash balances. However, it expects to obtain adequate cash from an income tax refund due in six months. Ashgold’s weighted average cost of capital is 20% per annum. What alternatives are available for making payment, and what are the advantages or disadvantages of each? (2) A key issue facing financial executives of multinational firms is exposure to exchange rate changes.a. Define…
A company manufactures a product in the United States and sells it in England. The unit cost of manufacturing is $52. The current exchange rate (dollars per pound) is 1.213. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556733 and exponent -2.5. A) Develop a model for the company's profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. Assume that the price ranges from £45 to £100 in increments of £1. Round your answer for the maximum profit to the nearest dollar and your answer for the best price to the nearest pound. 1. Maximum profit: $______ 2. Best price: £ ______
PT. AAH is currently is selling cooking oil for IDR 15.000/litre. Sales (all on credit) last year were recorded at 2.400.000 unit. Variable cost per unit is IDR 9.000/litre. The firm total fixed cost is IDR. 12.000.000.000. The firm is considering changing its credit policy. Assumption: 1 year = 360 days. PT. AAH initiate cash discount program, changing its credit terms from net 30 to 4/10 net 30. This change is expected to reduce the average collectionperiod from 40 days to 25 days. The sales unit is expected to increase 5% from the current level. PT. AAH estimates 85% of its customer will take the discount. The level of bad debt percentage will be decreasing from 2% to 0.5%. The cost of investment in Account Receivable is 17%. Should PT. AAH change its current account receivable policy?Explain your answer

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Assumptions	Values
Sales Volume per Year	900
US Dollar Price of Annual Subscription	240
Spot Exchange Rate (MWK$)	771.83
Expected Spot Rate (MWK/$)	1082.95
Unit Volume Decrease if Price in MWK Increased	45 %