16. Suppose your company imports computer motherboards from Singapore. The excha
ID: 2722174 • Letter: 1
Question
16.
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2839 S$/US$. You have just placed an order for 25,000 motherboards at a cost to you of 235.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $200 each.
What is your profit at the current exchange rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is your profit if the exchange rate goes up by 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is your profit if the exchange rate goes down by 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.)
What is the break-even exchange rate? (Round your answer to 4 decimal places, e.g., 32.1616.)
What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar?(Input the value as a positive number. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2839 S$/US$. You have just placed an order for 25,000 motherboards at a cost to you of 235.50 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $200 each.
Explanation / Answer
Now SGD1.2839 = USD1
Current Profit
cost of a mother board is SGD235.50 / 1.2839 = USD 183.43
Profit/Loss = -USD 183.43 = $16.57*25,000 = $414,362.49
What is your profit if the exchange rate goes up by 10 percent?
cost of a mother board is SGD235.50 / 1.41229= USD 166.75
90 days later
SGD = 1.2839(1.10) = 1.41229
Profit per board = USD 200 - 166.75= USD 33.25
Profit for 25,000 = 25,000 x 33.25= USD 831,238.63
What is your profit if the exchange rate goes down by 10 percent?
SGD = 1.2839(0.90) = 1.15551
cost of a mother board is SGD235.50 / 1.15551= USD 203.81
Profit per board = USD 200 - 203.81= -USD 3.88
Profit for 25,000 = 25,000 x(3.88)= USD 96
What is the break-even exchange rate?
Break Even Exchange rate: At Break Even there is no profit, no loss i.e. cost = Income
Sales = Income
(25,000/1.2839/235.50) = 16,537 = $16,537
Therefore at break even S$19,472 = $16,537
Exhange Rate = $16537/19,472 = 0.8493
At Exchange Rate 1S$ = $0.8493, there is Break Even
What percentage rise or fall does this represent in terms of the Singapore dollar versus the U.S. dollar?
The percentage fall= (0.8493 – 1.2839)/1.2839*100 = -33.85%
At Break Even the Exchange rate falls by -33.85%
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