A U.S. firm is expecting cash flows of 20 million Mexican pesos and 45 million I

Question

A U.S. firm is expecting cash flows of 20 million Mexican pesos and 45 million Indian rupees. The current spot exchange rates are $1 = 11.728 pesos and $1 = 45.207 rupees. Assume these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.124 pesos and $1 = 44.078 rupees.

   

What is the difference in dollars received that was caused by the delay? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.)

  

A U.S. firm is expecting cash flows of 20 million Mexican pesos and 45 million Indian rupees. The current spot exchange rates are $1 = 11.728 pesos and $1 = 45.207 rupees. Assume these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.124 pesos and $1 = 44.078 rupees.

Explanation / Answer

The firm would get $ 0.12 million more in one year.

Working:

Step-1:Dollar value as of today Million Dollar Value of: 20 Million mexican Pesos =               20 /      11.728 = $        1.71 45 Million Indian Rupee =               45 /      45.207 = $        1.00 Total $        2.70 Step-2:Dollar value at the end of year Million Dollar Value of: 20 Million mexican Pesos =               20 /      11.124 = $        1.80 45 Million Indian Rupee =               45 /      44.078 = $        1.02 Total $        2.82 Diiference in amount received $        0.12

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