Suppose your company imports computer motherboards from Singapore. The exchange
ID: 2645331 • Letter: S
Question
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2943 S$/US$. You have just placed an order for 24,000 motherboards at a cost to you of 239.00 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $200 each.
1. What is your profit at the current exchange rate? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
2.What is your profit if the exchange rate goes up by 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
3.What is your profit if the exchange rate goes down by 10 percent?
4.What is the break-even exchange rate? (Round your answer to 4 decimal places. (e.g., 32.1616))
5.What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar? (Input the value as positive numbers.)
Explanation / Answer
1. Sale Price = 24,000 * 200 = $ 4,800,000
Cost= 24,000 * 239 = S $ 5,736,000
Converting the S $ into US $ by applying the exchange rate, cost will be = 5,736,000/1.2943 = $ 4,431,739.16
Hence Profit = Sales- cost
Profit = $ 368,260.84
2. Exchange rate goes up by 10% means depreciation in the value of Singapore $.
New rate after 10% increase = S $ 1.4237 per US $ { Calculation Step: 1.2943 *1.1}
Profit = Sales - Cost = 4,800,000 - ( 24,000 * 239)/1.4237= $ 771,061.32
3. Exchange rate goes down means appreciation in value of Singapore $
Now, rate will be: S$ 1.1649 per US $
Loss = 4,800,000- (24,000*239)/1.1649 = $ 124,027.81
4.At Break-even exchange rate, there will be neither profit, nor loss.
4,800,000 - (24,000*239)/x = 0
Solving the above equation we get Break even exchange rate= S$1.1950 per US$
5. % Fall = (1.2943 - 1.1950)/1.2943 = 7.67%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.