Suppose your company imports computer motherboards from Singapore. The exchange
ID: 2750704 • Letter: S
Question
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2839 S$/US$. You have just placed an order for 25,000 motherboards at a cost to you of 235.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $200 each.
What is your profit at the current exchange rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is your profit if the exchange rate goes up by 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is your profit if the exchange rate goes down by 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Negative amounts should be indicated by a minus sign.)
What is the break-even exchange rate? (Round your answer to 4 decimal places, e.g., 32.1616.)
What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar? (Input the value as a positive number. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
What is your profit at the current exchange rate?
Puchase expense per unit in US dollar = USD 235.50 / 1.2839
= USD 183.43
Therefore, profit per unit = USD 200 - USD 183.43
= USD 16.57
Overall profit = USD 16.57 * 25,000
= USD 414,362.50
What is your profit if the exchange rate goes up by 10 percent?
Puchase expense per unit in US dollar = USD 235.50 / [1.2839 * (1+10%)]
= USD 166.75
Therefore, profit per unit = USD 200 - USD 166.75
= USD 33.25
Overall profit = USD 33.25 * 25,000
= USD 831,238.63
What is your profit if the exchange rate goes down by 10 percent?
Puchase expense per unit in US dollar = USD 235.50 / [1.2839 * (1-10%)]
= USD 203.81
Therefore, profit per unit = USD 200 - USD 203.81
= -USD 3.81 (loss)
Overall profit = -USD 3.81 * 25,000
= -USD 95,152.78 (loss)
What is the break-even exchange rate?
Let the exchange rate be 'x'.
Puchase expense per unit in US dollar = USD 235.50 / x
Therefore, profit per unit = USD 200 - USD 235.50 / x
=> 0 = USD 200 - USD 235.50 / x
=> x = 1.1775
Therefore, break-even exchange rate is 1.1775 S$/US$.
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