ZuoTi.Pro
Question

Assume your U.S. company has a contract to purchase 100,000 computers from a Korean company. The...

Assume your U.S. company has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on December 31, 2018. In July 2018, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in July 2018 is $1 in exchange for 1,088 won.

1. Calculate the U.S. dollar price (in July 2018) of one unit of Korean currency.

2. What is the total price of the computers in dollars?
3. What is the total price of the computers in won?

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

Homework Answers

Answer #1

a)

Cost of one unit of laptop = 7000 won

Exchange rate = $1 in exchange for 18.77 won

USD price of one unit of laptop = 7000/18.77 = $372.94

b)

If won appreciates by 10%

New exchange rate = $1 in exchange for 16.89 won

USD price of one unit of laptop = 7000/16.89 = $414.45

Increase in USD laptop price = 414.45 - 372.94 = $41.51

Loss on purchase of 10000 computers = 10000*$41.51 = $415100

0 0
Add a comment
Know the answer?
Add Answer to:
Assume your U.S. company has a contract to purchase 100,000 computers from a Korean company. The...
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

  • Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...

    Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy equipment. The purchase price was Won7,900 million. Won 1,000 million has already been paid, and the remaining Won6,900 million is due in six months. The current spot rate is Won1,114/$, and the 6-month forward rate is Won1,161/$. The 6-month Korean won interest rate is 16% per annum, the 6-month U.S. dollar rate is 3% per annum. Bobcat can...

  • You manage a company located in the U.S. and the profits you report to your shareholders...

    You manage a company located in the U.S. and the profits you report to your shareholders are in $US. Today your company signed a contract with a Canadian company to import computer parts from Canada with delivery 6 months from today and with the price of the parts in Canadian dollars. You will use these parts to build computers in the U.S. and sell the computers to a Japanese company. You have also signed a contract with the Japanese company...

  • On December 10, 2020, Robin Franchises, a U.S. company, received a purchase order from a U.K....

    On December 10, 2020, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2021. The price of the merchandise is £10,000,000, payable on March 15, 2021, in pounds. To hedge its exposure to exchange rate changes, on December 10, 2020, Robin entered a forward contract for delivery of £10,000,000 to the broker on March 15, 2021. The merchandise was delivered as scheduled. On March 15, 2021, Robin received payment...

  • 5. On December 1, 2018, Keenan Company, a U.S. firm, sold merchandise to Velez Company of...

    5. On December 1, 2018, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2019. Keenan purchased a foreign currency put option with a strike price of $.97 (U.S.) on December 1, 2018. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow: Date Spot Rate Option Premium December 1, 2018 $ 0.97 $ 0.05 December 31, 2018...

  • Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment...

    Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 34,000 Canadian dollars at C$1 = $0.50. The forward contract was acquired to manage Merit & Family’s exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates were March 10 C$1 = $ 0.49 June 8 C$1 = $ 0.52...

  • Bushnell Company, a U.S.-based exporter of fitness equipment received an order from a Japanese cu...

    Bushnell Company, a U.S.-based exporter of fitness equipment received an order from a Japanese customer for 100 units of treadmills at a price of ￥100,000 per unit (The total export amount is ￥10,000,000). Relevant exchange rates are as follows: Date Spot rate Forward rate 12/1/2017 ￥100/$ ￥108/$ 12/31/2017 ￥110/$ ￥112/$ 1/31/2018 ￥115/$ ￥115/$ Bushnell Company prepares financial statements on December 31. Required 1. Assume Bushnell shipped the treadmills on 12/1/2017, and payment was made on 1/31/2018. On 12/1/2017, Bushnell Company...

  • FML Company in the U.S. has just signed a contract to purchase light rail cars from...

    FML Company in the U.S. has just signed a contract to purchase light rail cars from a manufacturer in Germany for euro 2,500,000. The purchase was made in June with payment in euro due six months later in December. Assume that in December, the axchange rate turns out to be as the company anticipated. If so, then the money market hedge turns out to be ____ than the unhedged position by ______. The spot exchange rate is $1.40/euro The six...

  • A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August...

    A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August and receive payment for it at the end of October. On May 1, when the spot rate is $1.20 and the forward rate for delivery on October 31 is $1.21, the company enters a forward contract to sell €100,000 on October 31. The forward contract qualifies as a cash flow hedge of the forecasted sale. The company sells the merchandise on August 30, when...

  • Maple Company had the following export and import transactions during 20X5: On March 1, Maple sold...

    Maple Company had the following export and import transactions during 20X5: On March 1, Maple sold goods to a Canadian company for C$49,000, receivable on May 30. The spot rates for Canadian dollars were C$1 = $0.65 on March 1 and C$1 = $0.68 on May 30. On July 1, Maple signed a contract to purchase equipment from a Japanese company for ¥440,000. The equipment was manufactured in Japan during August and was delivered to Maple on August 30 with...

  • Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020,...

    Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 27,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 27,000 dinars on March 1, 2021.Relevant exchange rates for the dinar on various dates are as follows: DateSpot RateForward Rate(to March 1, 2021)December 1, 2020$4.50$4.575December...

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