Case-in-brief - Argentina Currency DevaluationYour company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued. Itwants to examine two scenarios: one where the currency drops 15% and one where it drops 26%. Currently, the exchange rate is 94pesos (ARS$ 94) to 1 US dollar (US$1).Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage.Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos)Unit SalesManufacturer SalesCostsGross MarginTotal MarketingCont bution after MarketingUnits46ARS325.9 100%183.3142.673.369.3%56%44%22%21%QUESTION 1How would the devaluation of the Argentine peso (ARSS) affect your contribution in the home currency (US$)?Current contribution in USD (home currency): USD $ 0.000Contribution in USD after 15% drop: USD $ 0.000Contribution in USD after 26% drop: USD $ 0.000MillionsMillionMillionGo to last question

The question is asked for determining the effect of changes in the exchange rate on the total…

Answered: Case-in-brief - Argentina Currency…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Business firm buys 200000 worth of stereo speaker wire from Mexican manufacturer for delivery in 60 days with payment to be made in 90 days. The rising Business firm deficit had caused the dollar to depreciate against the peso recently. The current exchange rate is 5.50 pesos per U.S. dollar. The 90-day forward rate is 5.45 pesos/ dollar. The firm goes into forward market today and buys enough Mexican pesos at the 90-dat forward rate to completely cover its trade obligation. Assume that spot rate in 90 days is 5.40 Mexican pesos per U.S. dollar. How much in US dollars did the firm save by eliminating its foreign exchange currency risk with its forward market hedge?
A U.S. firm, sells merchandise today to a British company for £100,000. The current exchange rate is $1.38/£, the account is payable in three months, and the firm chooses to hedge by borrowing £98,765.43 today and exchanging the proceeds today for dollars; the loan will be paid back with the £100,000 accounts receivable (money market hedge). If Husky converted the borrowed pounds into dollars today and invested that amount at its WACC of 6% (1.5% for 90 days), how much much money in U.S. dollars will Husky Sporting Goods Company have in 90 days?
Without Using Excel: ABC Company wants to possibly expand its plant in Europe. The current spot exchange rate is for Euro is €0.83. The initial investment is €2.1, with projected cash flows for three years at €950,000. The discount rate is 10%. The risk-free rate in the US is 5 percent and the risk-free rate in Europe is 7 percent. Calculate the NPV of the project into US Dollars, rounding to the nearest cent, format as "XXX,XXX.XX"
Bing Ltd a UK based company is due to pay 80 million Lira to Google Ltd. The spot rate is Lira 2,400/£. Interest rates for the next year are expected to be 8% in the UK and 20% in Italy. Required: Assume the International Fisher Effect is valid, evaluate the effect on the sterling cost of this transaction if Bing Ltd delay payments by one year.
A US dollar costs 1.30 Canadian dollar (CAD), but the same dollar can be purchased for 25.0 Mexican peso (MXN). If the MXN/CAD exchange rate is quoted as 18.0, there is an opportunity for triangular arbitrage. Starting from a dollar, the arbitrager will first buy (CAD MXN) with the dollar to obtain blanks and explain your answer." % of riskless arbitrage profit for each round. Fill in
Victoria Exports (Canada). A Canadian exporter, Victoria Exports, will be receiving six payments of €13,400, ranging from now to 12 months in the future. Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to exchange the euros for at the end of the various periods. Which currency appears to offer the better rates in the forward market? (Click on the icon to import the table into a spreadsheet.) U Period spot 1 month 2 months 3 months 6 months 12 months Period Days Forward Spot 1 month 2 months Days Forward 30 60 90 180 360 0 30 60 Calculate the forward premium, the Canadian dollar proceeds, and the difference from the spot rate proceeds in the C$/Euro forward market below: (Round the forward premium to three decimal places and the Canadian dollar amounts to the nearest cent.) C$/euro C$/euro 1.3337 1.3364 1.3386 1.3412 1.3437 1.3461 1.3337 1.3364 1.3386 US$/euro 1.3217 1.3220 1.3222 1.3225 1.3230 1.3256 Forward Premium on the…
Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.3595 per Singapore dollar. You have just placed an order for 39328 motherboards at a cost to you of S146 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $118 each. Calculate your profit if the exchange rates goes down by 12.23% over the next 90 days. NOTE: Enter the number rounding to four DECIMALS. If your decimal answer is 0.034576
Case-in-brief - Chapter 6 - Argentina Currency Devaluation Your company is currently operating in Argentina. Management is concerned to what extent the Argentine peso will be devalued. It wants to examine two scenarios: one where the currency drops 15% and one where it drops 25%. Currently, the exchange rate is 92 pesos (ARS$ 92) to 1 US dollar (US$1). Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage. Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos) Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Units ARS % 46 325.9 100% 183.3 56% 142.6 44% 73.3 22% Contribution after Marketing 69.3 21% QUESTION 2 How much more sales revenue would be needed in Argentina to maintain your current contribution after marketing? Additional Manufacturer Sales in Argentine Pesos after 15% drop: 0.000 Additional Manufacturer Sales in Argentine Pesos after 25% drop: 0.000
Given the following information, take advantage of the triangular arbitrage opportunity and calculate the US dollar profit for an investment of $1,000,000. Keep at least two decimals in your calculations and round at the very end to enter your answer with no decimals (i.e, if your final answer is 9.98, you will enter 10). Singapore dollar in US dollars (USD/SGD) 0.73 US dollars in British pounds (GBP/USD) 0.83 Singapore dollar in British pounds (GBP/SGD) 0.71
Synergy Incorporated, a US based Multinational Company (MNC) manufacturing electrical appliances. The company currently having problem of increasing in labor cost and therefore it affects the company's has profit. The company has decided to reduce the cost. The Board of Directors is considering building a plant in South East Asia, Singapore and Indonesia are countries under consideration. Below are the estimatedcash flow and exchange rate for both countries. Singapore Indonesia Forecasted Cash Flow Forecasted Exchange Year Cash Flow (IND) Exchange (SGD) (USD/SGD) (USD/IDR) 2017 (300,000) SGD4.4852 (5,200,000) IDR49.582 2018 65,000 SGD4.0614 1,500,000 IDR49.9648 2019 52,000 SGD4.1323 1,600,000 IDR52.4211 2020 60,000 SGD4.0905 1,800,000 IDR50.6107 2021 75,000 SGD4.4028 2,500,000 IDR51.3034 Based on the information, compute the potential investment's net present value (NPV) for Singapore and Indonesia if the company has weighted cost of capital of 10 and 12 percent. Suggest which location…
A company manufactures a product in the United States and sells it in England. The unit cost of manufacturing is $52. The current exchange rate (dollars per pound) is 1.213. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556733 and exponent -2.5. A) Develop a model for the company's profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. Assume that the price ranges from £45 to £100 in increments of £1. Round your answer for the maximum profit to the nearest dollar and your answer for the best price to the nearest pound. 1. Maximum profit: $______ 2. Best price: £ ______

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS