Question

Activity 2 - A business expects the following cash flows: 1. Receipt of US$10,000 now months time 2. Payment of £5,200 now months time. W M H Exchanges rate K per $ and K per £ are as follows: K per $ K per £ Spot rate 21.902 22.550 26. 840 27.180 2 months forward 22.540 22.900 27.150 27.350 JUAN UNIVERSITY Required: Determine the kwacha equivalent amounts of the above cash flows if conversion takes place now.​

Answer 1

The kwacha equivalent amounts of the cash flows are K268,400 for the receipt and K3,096,863.352 for the payment.

Step-by-step explanation:

In order to determine the kwacha equivalent amounts of the cash flows, we need to use the exchange rates provided. The first cash flow is the receipt of US$10,000, which we can convert to kwacha using the spot rate of K26.840 per US$. Therefore, the kwacha equivalent of the receipt is 10,000 * 26.840 = K268,400.

The second cash flow is the payment of £5,200, which we can convert to US$ using the spot rate of K27.180 per £. Therefore, the US$ equivalent of the payment is 5,200 * 27.180 = US$141,576.

Finally, we can convert the US$ equivalent of the payment to kwacha using the spot rate of K21.902 per US$. Therefore, the kwacha equivalent of the payment is 141,576 * 21.902 = K3,096,863.352.