Suppose your company imports computer motherboards from Singapore. The exchange
ID: 2724851 • Letter: S
Question
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2836 S$/US$. You have just placed an order for 24.000 motherboards at a cost to you of 236.00 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $195 each. 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.) What is your profit if the exchange rate goes up by 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Profit if the exchange rate up by 10% $ What is your profit if the exchange rate goes down by 10 percent? (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 10% $ What is the break-even exchange rate? (Round your answer to 4 decimal places, e.g., 32.1616.) What percentage rise or fall does this represent in terms of the Singapore dollar versus the U S. dollar? (Input the value as a positive number. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Explanation / Answer
1
Calculation of Profits at current exchange rates:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.2836 =
$ (4,412,589.59)
Profits =
$ 267,410.41
2
Calculation of Profits if exchange rate goes up by 10%:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Expected exchange rate : 1 US $ = 1.2836 S$ *110% = 1.41196 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.41196 =
$ (4,011,445.08)
Profits =
$ 668,554.92
3
Calculation of Profits if exchange rate goes down by 10%:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Expected exchange rate : 1 US $ = 1.2836 S$ *90% = 1.15524 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.15524 =
$ (4,902,877.32)
Profits =
$ (222,877.32)
4
Calculation of break even exchange rate:
(At break even exchange rate , the profit shall be zero or say the Sales Revenue in US $ shall be eqaul to Cost in US $ )
Lets say breakeven exchange rate is X
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Cost of Mother boards in US $ = S$ 5,664,000 / X =
= 5,664,000 / X
Hence ,
5,664,000 / X = 4680000
X =5664000/4680000 =
1.21026
Hence Breakeven exchange rate shall be : 1.21026 S$ / US$
1
Calculation of Profits at current exchange rates:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.2836 =
$ (4,412,589.59)
Profits =
$ 267,410.41
2
Calculation of Profits if exchange rate goes up by 10%:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Expected exchange rate : 1 US $ = 1.2836 S$ *110% = 1.41196 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.41196 =
$ (4,011,445.08)
Profits =
$ 668,554.92
3
Calculation of Profits if exchange rate goes down by 10%:
US $
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Less: Cost of Mother boards in US $:
Cost of Mother boards in S $ = 24000* S$236 = S$ 5,664,000
Current exchange rate : 1 US $ = 1.2836 S$
Expected exchange rate : 1 US $ = 1.2836 S$ *90% = 1.15524 S$
Cost of Mother boards in US $ = S$ 5,664,000 / 1.15524 =
$ (4,902,877.32)
Profits =
$ (222,877.32)
4
Calculation of break even exchange rate:
(At break even exchange rate , the profit shall be zero or say the Sales Revenue in US $ shall be eqaul to Cost in US $ )
Lets say breakeven exchange rate is X
Sales Revenue in US $ = (24000 Mother boards * $195)
$ 4,680,000.00
Cost of Mother boards in US $ = S$ 5,664,000 / X =
= 5,664,000 / X
Hence ,
5,664,000 / X = 4680000
X =5664000/4680000 =
1.21026
Hence Breakeven exchange rate shall be : 1.21026 S$ / US$
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