A U.S. firm is expecting cash flows of 70 million Mexican pesos and 85 million I

Question

A U.S. firm is expecting cash flows of 70 million Mexican pesos and 85 million Indian rupees. The current spot exchange rates are $1 = 11.748 pesos and $1 = 45.217 rupees. Assume these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.144 pesos and $1 = 44.088 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 70 million Mexican pesos and 85 million Indian rupees. The current spot exchange rates are $1 = 11.748 pesos and $1 = 45.217 rupees. Assume these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.144 pesos and $1 = 44.088 rupees.

Explanation / Answer

Dollar amount received today = 70/11.748 + 85/45.217

dollar amount received today = 7.8383

Dollar amount received in a year = 70/11.144 + 85/44.088

dollar amount received in a year = 8.2094

difference = 8.2094 - 7.8383 = 0.37 million

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