CH 18 Drill Q2 Suppose your company imports computer motherboards from Singapore

Question

CH 18 Drill Q2

Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.5133 S$/US$. You have just placed an order for 34.000 motherboards at a cost to you of 230.95 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $164 each. (Enter your answer as directed, but do not round intermediate calculations.) Calculate your profit if the exchange rates stay the same over the next 90 days.(Round your answer to 2 decimal places (e.g., 32.16).) Profit $ Calculate your profit if the exchange rate rises by 8 percent over the next 90 days.(Round your answer to 2 decimal places (e.g., 32.16).) Profit $ Calculate your profit if the exchange rate falls by 8 percent over the next 90 days.(Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) Profit $ What is the break-even exchange rate? (Round your answer to 4 decimal places (e.g., 32.1616).) Break-even exchange rate S$ /$ What percentage decrease does this represent in terms of the Singapore dollar versus the U.S. dollar? (Input the amount as positive value. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Percentage decrease %

Explanation / Answer

Exchange rate 1USD = SGD1.5133

Purchase price in USD = SGD 230.95/1.5133 = $152.6135 per motherboard

a) Profit per motherboard = $164 - $152.6135 = $11.39

For 34,000 motherboards, profit at same exchange rate of SGD 1.5133 is $387,141.21

b) if exchange rate rises by 8%, hence exc rate is SGD 1.6344 and purchase price will be $141.31 and profit will be $22.69 and for 34,000 motherboards, it will be $771,501.1

c) If the exchange rate falls by 8%, then exc rate will be $1.,3922 and purchase price will be $165.88 hence loss will be $1.88 and for 34,000 motherboards, loss will be -$64,063.9

Requirement 2:

Breakeven exchange rate will be calculated as follows = SGD 230.95 / USD 164 = SGD 1.4082

Requirement 3"

% decrease = SGD 1.4082 / SGD 1.5133 = 6.95%

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