Question

suppose your company imports computer motherboards from singapore. the exchange rate is given in figure 21.1. you have just placed an order for 30,000 motherboards at a cost to you of 218.50 singapore dollars each. you will pay for the shipment when it arrives in 90 days. you can sell the motherboards for $175 each. a. what is your profit at the current exchange rate? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. what is your profit if the exchange rate goes up by 10 percent over the next 90 days? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. what is your profit if the exchange rate goes down by 10 percent over the next 90 days? (a negative answer should be indicated by a minus sign. do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. ) d. what is the break-even exchange rate? (round your answer to 4 decimal places, e.g., 32.1616.) e. what percentage rise or fall does this represent in terms of the singapore dollar versus the u.s. dollar? (input the value as a positive number. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

The profit at the current exchange rate is 480,075 Singapore dollars. If the exchange rate goes up by 10 percent, the profit would increase to 1,184,575 Singapore dollars. If the exchange rate goes down by 10 percent, the profit would be a loss of 233,925 Singapore dollars. The break-even exchange rate is 1.2486 Singapore dollars per U.S. dollar. The rise in the exchange rate represents a 9.99% increase in the Singapore dollar versus the U.S. dollar.

In order to calculate the profit at the current exchange rate, we need to consider the cost of the motherboards, the selling price, and the exchange rate.

The cost of 30,000 motherboards at 218.50 Singapore dollars each is 30,000 x 218.50 = 6,555,000 Singapore dollars. The revenue from selling 30,000 motherboards at $175 each is 30,000 x 175 = $5,250,000.

Using the exchange rate of 1 U.S. dollar = 1.3403 Singapore dollars, the revenue in Singapore dollars is 5,250,000 x 1.3403 = 7,035,075 Singapore dollars.

The profit is the revenue minus the cost, which is 7,035,075 - 6,555,000 = 480,075 Singapore dollars.

If the exchange rate goes up by 10 percent, the new exchange rate would be 1.4743 Singapore dollars per U.S. dollar. The revenue in Singapore dollars would be 5,250,000 x 1.4743 = 7,739,575 Singapore dollars.

The profit would be 7,739,575 - 6,555,000 = 1,184,575 Singapore dollars, an increase of 1,184,575 - 480,075 = 704,500 Singapore dollars.

If the exchange rate goes down by 10 percent, the new exchange rate would be 1.2063 Singapore dollars per U.S. dollar.

The revenue in Singapore dollars would be 5,250,000 x 1.2063 = 6,321,075 Singapore dollars.

The profit would be 6,321,075 - 6,555,000 = -233,925 Singapore dollars.

This negative profit indicates a loss.

The break-even exchange rate is the exchange rate at which the profit is zero. We can set up the equation: Revenue in Singapore dollars - Cost in Singapore dollars = 0.

Rearranging the equation, we get Revenue in Singapore dollars = Cost in Singapore dollars.

Substituting the values, we have 5,250,000 x Exchange rate = 6,555,000.

Solving for the exchange rate, we get Exchange rate = 6,555,000 / 5,250,000 = 1.2486 Singapore dollars per U.S. dollar.

To calculate the percentage rise or fall in the exchange rate, we can use the formula:

Percentage change = (New value - Old value) / Old value * 100.

In this case, the Old value is 1.3403 Singapore dollars per U.S. dollar and the New value is 1.4743 Singapore dollars per U.S. dollar.

Plugging in the values, we get Percentage change = (1.4743 - 1.3403) / 1.3403 * 100 = 9.99%.

This represents a rise of approximately 10% in terms of the Singapore dollar versus the U.S. dollar.