Jason Stedman is the director of finance for Burton Manufacturing a US based manufacturer of handheld computer systems for inventory manangement. Burton's system combines a low-cost active tag that is attached to inventory items (the tag emits an extremely low grade radio frequency) with custom designed hardware and software that tracks the low greade emissions for inventory control. Burton has completed the sale of an inventory manangement system to a British Fire, Pegg Metropolitan (UK), for a total 1,300,000., The exchange rates shown in the table were availiable to Burton on the dates shown, corresponding to the events of this specific export sale. Assume each month is 30 days Date Event Spot Rate ($/L) Forward Rate($/L) DaysFrwrd Feb 1 price quotation for Pegg 1.7799 1.7717 210 Mar 1 Contract signed for sale 1.7497 1.7422 180 contract amount pounds 1,300,000 june 1 Product shipped to Pegg 1.7633 1.7549 90 Aug 1 Product received by Pegg 1.7904 1.7867 30 Sept. 1 Pegg makes Payment 1.7131 -- --- What will be the amount of foreign exchange gain or loss up settlement _______________ If Jason hedges the exposure with a forward contract purchased on the date the product is shipped, what will be the net foreign exchange gain (loss) on settlement? If Jason hedges the exposure with a forward contract purchased on the date the contract is signed what will be the net foreign exchange gain (loss) on settlement?
Jason Stedman is the director of finance for Burton Manufacturing a US based manufacturer of handheld computer systems for inventory manangement. Burton's system combines a low-cost active tag that is attached to inventory items (the tag emits an extremely low grade radio frequency) with custom designed hardware and software that tracks the low greade emissions for inventory control. Burton has completed the sale of an inventory manangement system to a British Fire, Pegg Metropolitan (UK), for a total 1,300,000., The exchange rates shown in the table were availiable to Burton on the dates shown, corresponding to the events of this specific export sale. Assume each month is 30 days
Date Event Spot Rate ($/L) Forward Rate($/L) DaysFrwrd
Feb 1 price quotation for Pegg 1.7799 1.7717 210
Mar 1 Contract signed for sale 1.7497 1.7422 180
contract amount pounds 1,300,000
june 1 Product shipped to Pegg 1.7633 1.7549 90
Aug 1 Product received by Pegg 1.7904 1.7867 30
Sept. 1 Pegg makes Payment 1.7131 -- ---
What will be the amount of foreign exchange gain or loss up settlement _______________
If Jason hedges the exposure with a forward contract purchased on the date the product is shipped, what will be the net foreign exchange gain (loss) on settlement?
If Jason hedges the exposure with a forward contract purchased on the date the contract is signed what will be the net foreign exchange gain (loss) on settlement?
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