An export import company holding the following buy sale positions is expected to be crystallized in 1 year. Import:-1) Raw material purchase deal of euro 50 million to be paid in 1 year. 2) Interest cost of 6% on bill amount for credit payment to be paid. Export:- 1) Sale of goods in the US for $ 30 million to be received in 1 year. 2) Credit charge to be received @7%. 3) Sale of goods in india for Rs2.6 billion to be received in 1 year. 4) Credit charge to be received @12%. The EXIM company expects that at the end of financial year, the exchange rate will be around 1 Euro =1.2 $ while 1 $=Rs 90. However, to hedge all receivables and payables with the opposite position, the company must incur 2 million. As a financial manager, what do you suggest company should keep their books open or hedge? Calculate the position for the end of the year, with the interest amount, the position of buy sale would be?
An export import company holding the following buy sale positions is expected to be crystallized in 1 year. Import:-1) Raw material purchase deal of euro 50 million to be paid in 1 year. 2) Interest cost of 6% on bill amount for credit payment to be paid. Export:- 1) Sale of goods in the US for $ 30 million to be received in 1 year. 2) Credit charge to be received @7%. 3) Sale of goods in india for Rs2.6 billion to be received in 1 year. 4) Credit charge to be received @12%. The EXIM company expects that at the end of financial year, the exchange rate will be around 1 Euro =1.2 $ while 1 $=Rs 90. However, to hedge all receivables and payables with the opposite position, the company must incur 2 million. As a financial manager, what do you suggest company should keep their books open or hedge? Calculate the position for the end of the year, with the interest amount, the position of buy sale would be?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An export import company holding the following buy sale positions is expected to be crystallized in 1 year.
Import:-1) Raw material purchase deal of euro 50 million to be paid in 1 year.
2) Interest cost of 6% on bill amount for credit payment to be paid.
Export:- 1) Sale of goods in the US for $ 30 million to be received in 1 year.
2) Credit charge to be received @7%.
3) Sale of goods in india for Rs2.6 billion to be received in 1 year.
4) Credit charge to be received @12%.
The EXIM company expects that at the end of financial year, the exchange rate will be around 1 Euro =1.2 $ while 1 $=Rs 90. However, to hedge all receivables and payables with the opposite position, the company must incur 2 million. As a financial manager , what do you suggest company should keep their books open or hedge?
Calculate the position for the end of the year, with the interest amount, the position of buy sale would be?
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