Question

Suppose your company imports computer motherboards from Singapore. You have just placed an order for 40,000 motherboards at a cost to you of 155.80 Singapore dollars each. You will pay for the shipment when it arrives in 30 days. You can sell the motherboards for $135 each. The current exchange rate is S$1.1979/$.
   
What is your profit at the current exchange rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Profit at the current exchange rate           $ ?????
  
What is your profit if the exchange rate goes up by 5 percent prior to the shipment's arrival? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Profit if the exchange rate up by 5%           $ ?????
  
What is your profit if the exchange rate goes down by 5 percent prior to the shipment's arrival? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.)
  
Profit if the exchange rate down by 5%           $ ?????
  
What is the percentage change in the exchange rate that would result in a break-even profit? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.)
  
Percentage change in exchange rate            % ?????

Answer 1

Part A:

Profit = $ sales - $ cost

=[ $ 135 * 40000 ] - [ (155.80 / 1.1979 ) * 40000 ]

= $ 5400000 - $ 5202438

= $ 197562.40

PART B:

If Exchange rate goes up by 5%:

1 USD = 1.1979 * 1.05

= 1.2578

Profit = [ 135 * 40000 ] - [ ( 155.8 / 1.2578 ) * 40000 ]

= $ 5,400,000 - $ 4,954,682.78

= 445,317.22

Part C:

If Exchange rate goes down by 5%:

1 USD = 1.1979 * 0.95

= 1.1380

Profit = [ 135 * 40000 ] - [ ( 155.8 / 1.1380 ) * 40000 ]

= $ 5,400,000 - $ 5,476,274.17

= - $ 76,274.17

Part D:

% Change for Zero Profit

Exchange rate to be for Zero Profit is Sale Price = COst

$ 135 = S $ 155.8

1 USD = 155.8 / 135

1 USD = 1.1541 S $

CHange in % = [ 1.1541 - 1.1979 ] / 1.1979

= - 0 .0438 / 1.1979

= -0.0366 i.e - 3.66%