Question

Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2855 S$/US$. You...

Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2855 S$/US$. You have just placed an order for 24,000 motherboards at a cost to you of 231.00 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $194 each. NOT EXCEL

  

  1. What is your profit at the current exchange rate?

  

  1. What is your profit if the exchange rate goes up by 10 percent?

  

  1. What is your profit if the exchange rate goes down by 10 percent?

  

  

  1. What is the break-even exchange rate?

  

  

  1. What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar

Homework Answers

Answer #1

a) Profit on current exchange rate
24000*(194 - 231.00/1.2855) = 343281.21

b) If exchange rate goes up 10%, then new exchange rate = 1.2855*1.1 = 1.41405
Profit on current exchange rate
24000*(194 - 231.00/1.41405) = 735346.56

c) If exchange rate goes down 10%, then new exchange rate = 1.2855*0.9 = 1.15695
Profit on current exchange rate
24000*(194 - 231.00/1.15695) = -135909.76

d) Breakeven rate
24000*(194 - 231.00/r) = 0
r = 231/194 = 1.190722

e) Fall % = (1.2855 - 1.1907)/1.2855 = 7.375%

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