MINI CASE 1 Efficient Funds Flow at Eastern Trading Company The Eastern Trading Company of Singapore purchases spices in bulk from around the world, packages them into consumer-size quantities and sells them through sales affiliates in Hong Kong, the United Kingdom and the United States. For a recent month, the payments matrix of interaffiliate cash flows (at right), stated in Singapore dollars, was forecast. Show how Eastern Trading can use multilateral netting to minimize the foreign exchange transactions necessary to settle interaffiliate payments. If foreign exchange transactions cost the company 0.5 percent, what savings result from netting? Eastern Trading Company Payments Matrix (S$000) Disbursements Hong Singapore Kong UK Total Receipts US Receipts Singapore Hong Kong UK US Total disbursements 34 40 75 8. 15 11 55 22 17 9. 170 30 32 45 25 65 84 94 277

MINI CASE 1 Efficient Funds Flow at Eastern Trading Company The Eastern Trading Company of Singapore purchases spices in bulk from around the world, packages them into consumer-size quantities and sells them through sales affiliates in Hong Kong, the United Kingdom and the United States. For a recent month, the payments matrix of interaffiliate cash flows (at right), stated in Singapore dollars, was forecast. Show how Eastern Trading can use multilateral netting to minimize the foreign exchange transactions necessary to settle interaffiliate payments. If foreign exchange transactions cost the company 0.5 percent, what savings result from netting? Eastern Trading Company Payments Matrix (S$000) Disbursements Hong Singapore Kong UK Total Receipts US Receipts Singapore Hong Kong UK US Total disbursements 34 40 75 8. 15 11 55 22 17 9. 170 30 32 45 25 65 84 94 277

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter12: Managing Economic Exposure And Translation Exposure

Section: Chapter Questions

Problem 11QA

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