Question

Visited, Not Yet Judged 3.Not Answered 4.Not Answered 5.Not Answered 6.Not Answered 7.Not Answered 8.Not Answered 9.Not Answered 10.Not Answered Question Workspace Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 130.5 million yen, when the exchange rate was 140.0 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars

Answer 1

DeGraw Corporation

The dollar amount that DeGraw would actually receive after it exchanged yen for U.S. dollars is:

= $845,207

Step-by-step explanation:

a) Data and Calculations:

Japanese Yen U.S. Dollar

Price Price

Sale of a solar heating station 130.5 million $932,143.86 (130.5m/140 yen)

Payment in 6 months' time 130.5 million $845,207.25 (130.5m/154.4 yen)

b) When the yen fell against the dollar from 140 yen to 154.4 yen, the dollar amount that DeGraw would receive reduced from $932,143 to $845,207.25. This is a loss of $86,935.61 due to exchange rate fluctuations.