Question

suppose your company imports computer motherboards from singapore. the exchange rate is currently 1.2836S$/US$. you have just placed an order for 24,000 motherboards at a cost to you of 236 singapore dollars each. you will pay for the shipment when it arrives in 90 days. you can sell the motherboards for $195 each. what is your profit at the current exchange rate? what is your profit if the exchange rate goes up by 10 percent over the next 90 days? what is your profit if the exchange rate goes down by 10 percent over the next 90 days? what is the break even exchange rate? what percentage rise or fall does this represent in terms of singapore dollar versus the us dollar?

Answer 1

	A	Cost per unit in Singapore dollar	236
	B	Number of units imported	24,000
	C=A*B	Total Cost in Singapore Dollar	5664000
	D	Exchange Rate S$/US$	1.2836
	E=C/D	Total Cost in US dollar	4,412,589.59
	F	Selling per unit in US dollar	195
	G=F*B	Total Selling price in US dollar	4,680,000
	H=G-E	Profit in current exchange rate (USD)	$267,410.41
		If Exchange Rate goes up by 10%
	I	Exchange Rate S$/US$	1.41196	(1.1*1.2836)
	J=C/I	Total Cost in US dollar	4011445.083
	K=G-J	Profit with INCREASED exchange rate (USD)	$668,554.92
		If Exchange Rate goes down by 10%
	L	Exchange Rate S$/US$	1.15524	(0.9*1.2836)
	M=C/L	Total Cost in US dollar	4902877.32
	N=G-M	Profit/(Loss) with DECREASED exchange rate	(222,877.32)	USD
		Break even Exchange Rate X S$=1USD
		TotalCost in US dollar=5664000/X
		Total Selling Price in US dollar	4,680,000
		(5664000/X)=4680000
		X=5664000/4680000=	1.21026
		1.2103S$/US$
		Percentage of fall:
		(1.2836-1.2103)/1.2836=	5.71%