Elan Pharmaceuticals. Elan Pharmaceuticals, a U.S.-based multinational pharmaceutical company, is evaluating an export sale of its cholesterol-reduction drug witha prospective Indonesian distributor. The purchase would be for 1,680 million Indonesian rupiah (Rp), which at the current spot exchange rate of Rp9,440/$, translatesinto $177,966.10. Although not a big sale by company standards, company policy dictates that sales must be settled for at least a minimum gross margin, in this case,a cash settlement of $171,000. The current 90-day forward rate is Rp9,940/$. Although this rate appeared unattractive, Elan had to contact several major banks beforeeven finding a forward quote on the rupiah. The consensus of currency forecasters at the moment, however, is that the rupiah will continue to strengthen, possiblyrising to Rp10,200/$ over the coming 90 to 120 days. Analyze the prospective sale and make a hedging recommendation.How much in U.S. dollars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp9,440/$?$177,966.10 (Round to the nearest cent.)How much in U.S. dollars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp10,200/$?$164705.88 (Round to the nearest cent.)How much in U.S. dollars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp9,940/S?(Round to the nearest cent)

An exchange rate is the worth of one country's cash versus the money of another country or monetary…

quote on the rupiah. The consensus of currency over the coming 90 to 120 days. Analyze the prospective sale and make a hedging recommendation. ars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp9, d to the nearest cent.) lars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp10 d to the nearest cent.) 4 1

quote on the rupiah. The consensus of currency over the coming 90 to 120 days. Analyze the prospective sale and make a hedging recommendation. ars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp9, d to the nearest cent.) lars will Elan receive in 90 days without a hedge if the expected spot rate in 90 days is assumed to be Rp10 d to the nearest cent.) 4 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Let’s suppose you (USA dealer) imported a product from German on Dec 1, 2018 at € 300, payable in 60 days. You sold the product in the US market at $400 in cash on Dec 15, 2018. The company's fiscal year ends on Dec 31. You paid to your German supplier on Feb 1, 2019. Below, please find the exchange rate information: Dec 1, 2018: 0.8 €/$.. Dec 31, 2018: 1.5 €/$. Feb 1, 2019: 0.6 €/$. What was net income for 2018 and 2019, respectively? Group of answer choices -$200, -$100 -$100, $200 $300, -$200 $200, -$300
A British money financier is managing €10 million and wants to invest it in safe bonds either in France or United Kingdom for one year. The one-year interest rate on such assets is 0.63% in Britain and 0% in France. The one-year forward euro-pound exchange rate is 1.121 €/£ (euros per pound). Assume that the covered interest parity condition (CIP) always holds and to ensure consistency, treat the UK as home country. What is the current euro-pound spot exchange rate?
A British money financier is managing €10 million and wants to invest it in safe bonds either in France or United Kingdom for one year. The one-year interest rate on such assets is 0.63% in Britain and 0% in France. The one-year forward euro-pound exchange rate is 1.121 €/£ (euros per pound). Assume that the covered interest parity condition (CIP) always holds and to ensure consistency, treat the UK as home country. What is the current euro-pound spot exchange rate? Explain and show your work.
Suppose that a U.S. company wishes to purchase goods from a German producer. The U.S. firm agrees to take the delivery of the goods in three months and to pay €1 million Euros at that time. This company wishes to avoid this exchange rate risk by buying Euros at the 3-month forward rate, f = 0.95 (€/$). Then, how much this company would have to pay in US dollars in exchange for €1 million Euros? a. $1 million dollars. b. $1,052,632 dollars. c. $950,000 dollars.
Suppose the annual interest rates in the U.S. (home nation) and the U.K (foreign nation) are 8% and 6%, respectively. A U.K. interest arbitrager decides to invest £10,000 in the U.S for three months. Given that the current spot rate is $2 per pound, calculate the EUD from investing in the U.S., assuming that on the maturity date the U.S. dollar is expected to depreciate by 1%. Interpret your result.
Let’s suppose you (USA dealer) imported one Earth Equipment machine from German dealer on March 1, 2017 at € 300,000 each, payable in 30 days. The exchange rate on March 1, 2017 was 1.16 US$/€. Then you sold the machine in the US market at US$350,000 in cash on March 29, 2017. On April 1, 2017, you paid to Italian car dealer at the exchange rate of 1.19 US$/€. What was profit or loss from this business in terms of US$? (Please assume all costs are included in price.) Group of answer choices -7000 -9200 -4500 -10200
Mary Argent is a foreign exchange trader for a bank in New York. She has Si million (or its Swiss franc equivalent) for a short term money market investment and wonders if she should invest in U.S. dollars for three months, or make a covered interest arbitrage investment in the Swiss franc. She faces the following quotes: $1,000,000 1.2810 Arbitrage funds available Spot exchange rate (SFr./S) 3-month forward rate SFr./$) U.S. dollar 3-month interest rate Swiss franc3-month Interest rate 1.2740 4.800% 3.200% She should Borrow: A 780,600 SF franes (SWISS) B. 1.281.000 USD (US dollars) C. 1.281.000 SF franes (SWISS) D. TBO.000 USD (US dollars)
A foreign exchange trader with a U.S. bank took a speculative long position of £6,000,000 when the GBP/USD was 1.3233. Subsequently, the exchange rate has changed to 1.3342. If the position is closed now, what is the profit/loss arising from that trade? (USD, no cents)
A US firm exporting to Mexico has set a price of MXN 2000 for a product with variable cost of $60. At an exchange rate of MXN 20/USD 1, per unit contribution is $40. What is the impact on per unit contribution if the exchange rate changes to MXN 25/USD 1, all else being equal? decrease 25% increase 50% increase 25% no change decrease 50%
Suppose that today is 1st January 2022, Anthony Tan is interested in hiring a software engineer from Malaysia for his company Grab in the United States by using a 3-month short-term contract to control and monitor the mobile app development. The current exchange rate between US Dollars and Malaysian Ringgit (RM) is:1 USD equals RM 4.12. (i) What should Anthony Tan do to manage the international exposure from operational, if, in March 2022, the exchange rate is 1 USD = RM 4.25? (ii) What should Anthony Tan do to manage the international exposure from operational, if, in June 2022, the exchange rate is USD 1 = RM 3.98?
Jetta production cost in 2002 and 2003 was 8,500 Euro per Jetta. Jettas were sold in US at $12,000 in 2002 and 2003. Forward hedge exchange rate was 1 $/Euro in 2003. The market exchange rate was 1.83 $/Euro (i.e. rate without hedge) in 2003. If 1,500 Jetta were sold in US, in 2003, by 40% forward hedge and 60% not hedged. What would be profits or loss from sales of 1,500 Jetta in US? € 351,639 €1, 281,946 € 1,291,661 € 362,259
The euro-pound cross exchange rate can be computed as: A. S(E/E) = S($/E) × S(€/S) %3D B. S($/£) S(E/S) S(€/£) = S(€/£) = S($/€) S(£/S) D. all of the above