ZuoTi.Pro
Question

A U.S. firm is expecting cash flows of 90 million Mexican pesos and 100 million Indian...

A U.S. firm is expecting cash flows of 90 million Mexican pesos and 100 million Indian rupees. The current spot exchange rates are $1 = 11.756 pesos and $1 = 45.221 rupees. Assume these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.152 pesos and $1 = 44.092 rupees. What is the difference in dollars received that was caused by the delay

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Value of Cash flows in USD today:

Convert 90M Mexican Pesos = 90 M / 11.756 = USD 7.6557 M

COmvert 100 M Rupees = 100 M / 45.221 = USD 2.2114 M

Value of Cash flows today = USD 9.8671 M

Value of Cash flows after 1 Year:

Convert 90M Mexican Pesos = 90 M / 11.152 = USD 8.0703 M

COmvert 100 M Rupees = 100 M / 44.092 = USD 2.2680 M

Value of Cash flows after 1 Year = USD 10.3383 M

DIfference due to delay = Vakue after 1 year - Value today

= USD 10.3383 M - USD 9.8671 M

= USD 0.4712M

Pls comment, if any further assistance is required.

0 0
Add a comment
Know the answer?
Add Answer to:
A U.S. firm is expecting cash flows of 90 million Mexican pesos and 100 million Indian...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Suppose a U.S. firm buys $200,000 worth of stereo speaker wire from a Mexican manufacturer for...

    Suppose a U.S. firm buys $200,000 worth of stereo speaker wire from a Mexican manufacturer for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received). The rising U.S. deficit has 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 the forward market today and buys enough Mexican pesos at...

  • a. Gold Is $350 per ounce In the United States and 2.800 pesos per ounce In Mexico. The nominal exchange rate between U.S. dollar and Mexican pesos that is Implled by the PPP theory Is: pesos. b. Mex...

    a. Gold Is $350 per ounce In the United States and 2.800 pesos per ounce In Mexico. The nominal exchange rate between U.S. dollar and Mexican pesos that is Implled by the PPP theory Is: pesos. b. Mexico experiences Inflation so that the price of gold rises to 4,200 pesos per ounce, whlle the price of gold remalns $350 per ounce In the United States. The nominal exchange rate between U.S. dollars and Mexican pesos that is Implied by the...

  • At today's spot exchange rates 1 U.S. dollar can be exchanged for 10 Mexican pesos or...

    At today's spot exchange rates 1 U.S. dollar can be exchanged for 10 Mexican pesos or for 110.19 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Round your answer to two decimal places.

  • 7. (Chapter 2) Suppose you put $100 million to buy Mexican assets when 2 pesos =...

    7. (Chapter 2) Suppose you put $100 million to buy Mexican assets when 2 pesos = 1 dollar, and then the exchange rate changed to 1.50 pesos = 1 dollar. This would mean your assets are (show your work) A. lower by 50 million pesos B. higher by 50 million pesos C. worth $133.33 million

  • On January 1, 2009, a U.S. firm made an investment in Germany that will generate $5 million annua...

    On January 1, 2009, a U.S. firm made an investment in Germany that will generate $5 million annually in depreciation, converted at current spot rate. Projected annual rates of inflation in Germany and in the United States are 5 percent and 2 percent, respectively. The real exchange rate is expected to remain constant and the German tax rate is 50 percent. Required: Calculate the expected real value (in terms of January 1, 2009 dollars) of the depreciation charge in year...

  • QUESTION 1 A U.S. MNC will receive 1 million Indian rupees (INR) in one year. The...

    QUESTION 1 A U.S. MNC will receive 1 million Indian rupees (INR) in one year. The current spot rate is INR75 /USD and the one year forward rate is INR320/USD. The annual interest rate is 5 percent in India and 0 percent in the United States. The dollar amount the firm will receive using the forward hedge is USD 75,000,000 USD 13,333 USD 3,125. None of the answers is correct. QUESTION 2 Suppose that Boeing Corporation exported a Boeing 747...

  • Sacramone Products Co. is a U.S.-based firm evaluating a project in Mexico. You have the following...

    Sacramone Products Co. is a U.S.-based firm evaluating a project in Mexico. You have the following information about the project: • The project requires a 150,000 peso investment today and is expected to generate cash flows of 61,500 pesos at the end of the next three years. • The current U.S. exchange rate with the Mexican peso is 11.567 pesos per U.S. dollar, and the exchange rate is expected to remain constant. • The firm's cost of capital is 9%,...

  • Question Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar....

    Question Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar. An American 17 company will incur losses from this falling exchange rate if the company is making: Not yet answered Select one: Marked out of 1。a. Credit purchases from Mexican companies at prices stated in Mexican Pesos. Flag question b. Credit purchases from Mexican companies at prices stated in U.S, dollars. c.Credit sales to Mexican companies at prices stated in U.S. dollars. O d....

  • Your company is looking at a new project in Mexico. The project will cost 900,000 pesos....

    Your company is looking at a new project in Mexico. The project will cost 900,000 pesos. The cash flows are expected to be 400,000 pesos per year for 5 years. The current spot exchange rate is 19.07 pesos per dollar. The risk-free rate in the US is 4%, and the risk-free rate in Mexico 8%. The dollar required return is 10%. What is the net present value of this investment in U.S. Dollars? PLEASE SHOW IN EXCEL

  • A manager of a corporation based in U.S. is expecting to receive 1,000,000 UK pounds in...

    A manager of a corporation based in U.S. is expecting to receive 1,000,000 UK pounds in 1 year from corporation’s UK client.At that time the manager is planning to exchange UK pounds for US dollars. Current market rates are as follows: U.S. 1-yearinterest rate is 6% per annum, UK 1-year interest rate is 4.5% per annum, the spot price of UK pound is $1.55, the forwardprice of UK pound is $1.56. Assume discrete compounding. What is the synthetic forward price...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT