Suppose your company imports computer motherboards from Singapore. The exchange
ID: 2737724 • Letter: S
Question
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2964 S$/US$. You have just placed an order for 25,000 motherboards at a cost to you of 238.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $200 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.) 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. Negative amounts should be indicated by a minus sign.) 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
(a)
Profit = Quantity * (Selling price per unit - Cost per unit/Exchange rate)
= 25000 * ($200 - $238,50/1.2964) = $400,725.08
(b)
Exchange rate = $1.2964*1.1 = 1.42604
Profit = Quantity * (Selling price per unit - Cost per unit/Exchange rate)
= 25000 * ($200 - $238,50/1.42604) = $818,840.99
(c)
Exchange rate = $1.2964*0.9 = 1.16676
Profit = Quantity * (Selling price per unit - Cost per unit/Exchange rate)
= 25000 * ($200 - $238,50/1.6676) = $110,305.46
(d)
Profit = Quantity * (Selling price per unit - Cost per unit/Exchange rate)
At break even, profit = 0
0 = 25,000 * (200 - 238.5/x)
200 - 238.5 = 0
-238.5/x = -200
-200x = -238.5
x = 238.5/200
x = 1.1925
Therefore, break -even exchange rate = $1.1925
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