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.)

Explanation / Answer

Currency Current Exchange Rate Currrent Value Expected Inflow 20 million Pesos $1=11.728Pesoso 1.7053206 45 million Indian Rupees $1=45.207 Rupees 0.995421063 $                  2.70 Million Currency Delayed Exchange Rate Delayed Value Expected Inflow 20 million Pesos $1=11.124Pesoso 1.797914419 45 million Indian Rupees $1=44.078 Rupees 1.020917464 $                  2.82 Difference $                  0.12 Because the currencies have appreciated - your cashflow has increased. You being the recepient are better off because of the appreciation of currencies

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.