Lee is the CFO of Sweet Company, headquartered in NY. All of the shareholders li

Question

Lee is the CFO of Sweet Company, headquartered in NY. All of the shareholders live in the United States. Recently, Sweet Company received the following loan in millions of Korean Won: ?1,000 M This was to finance a new factory in South Korea. At the time the loan was received, the exchange rate between the USD was 1 USD for 1200 South Korean Won. Due to the stronger US economy, the USD appreciated in value to 1 USD for 1400 SKW. How much hasSweetl Company made on the loan (either in a loss or as a gain) due to the rising USD?

Explanation / Answer

Hi, Please find the answer as follows: Loan obtained before appreciation (dollar value) = 1000/1200 = 833333.33 Loan obtained after appreciation (dollar value) = 1000/1400 = 714285.71 Net loss as a result of appreciation would be: 833333.33 - 714285.71= 119047.62 Thanks, Aman

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