Using the following information to answer the question. Below is the revenue and cost estimates for...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Using the following information to answer the question. Below is the revenue and cost estimates for DeKalb, Inc. All numbers are in millions (U.S. dollar or New Zealand dollar). U.S. Business New Zealand Business Sales $800 NZ$800 Cost of materials $500 NZ$100 Operating expense $300 Interest expense $100 Cash flow $100 NZ$700 There are three possible scenarios for the New Zealand dollar (NZ$) exchange rate: (1) NZ$ = $0.50, (2) NZ$ = $0.55, and (3) NZ$ = $0.60. All New Zealand dollar earnings will be remitted back to the U.S. parent at the end of the period. Answer the following questions: 1. What is the revenue in U.S. dollar in each of the scenario? 2. What is the total cost (sum of all three costs) in U.S. dollar in each of the scenario? 3. Assume the exchange rate today is NZ$ = $0.60. Should the firm consider hedging its NZ$ exposure? If so, suggest the action should be taken using futures as hedging tool. Using the following information to answer the question. Below is the revenue and cost estimates for DeKalb, Inc. All numbers are in millions (U.S. dollar or New Zealand dollar). U.S. Business New Zealand Business Sales $800 NZ$800 Cost of materials $500 NZ$100 Operating expense $300 Interest expense $100 Cash flow $100 NZ$700 There are three possible scenarios for the New Zealand dollar (NZ$) exchange rate: (1) NZ$ = $0.50, (2) NZ$ = $0.55, and (3) NZ$ = $0.60. All New Zealand dollar earnings will be remitted back to the U.S. parent at the end of the period. Answer the following questions: 1. What is the revenue in U.S. dollar in each of the scenario? 2. What is the total cost (sum of all three costs) in U.S. dollar in each of the scenario? 3. Assume the exchange rate today is NZ$ = $0.60. Should the firm consider hedging its NZ$ exposure? If so, suggest the action should be taken using futures as hedging tool.
Expert Answer:
Answer rating: 100% (QA)
New Zealand Business Exchange Rates 05 055 06 NZ US US US ... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
Students also viewed these accounting questions
-
Use the following information to answer the question on page 2 below: Note: all sales are credit sales. Compute each of the following ratios for 2017 and 2018 and indicate whether each ratio was...
-
Use the following information to answer the question below. Sanpin Motors is authorized to issue 100,000 shares of no-par stock. The company recently sold 40,000 shares for $13 per share. a. Prepare...
-
Using the following information about McAuliff e Company, decide whether you would want to loan money to thecompany. 2010 2011 2012 $1,295 (2,023) (1,450) 5,300 Net income. Cash provided by lused in)...
-
When the government allows private firms to extract minerals offshore or on public lands, two common means of sharing in the profits are bonus bidding and production royalties. The former awards the...
-
Fleming, a publicly held company, and several officers of the company, were sued by various stockholders for securities fraud for filing documents that were materially misleading. The stockholders...
-
For a popular computer tablet, the user ratings (1 through 5 stars, with 5 start being highest rating) of 10 randomly selected are given as follows 5, 5, 1, 4, 3, 5,4, 4, 5,4
-
Transaction Analysis} Aziz Company entered into the following transactions: a. Performed services on account, \(\$ 18,500\) b. Collected \(\$ 7,200\) from client related to services performed in...
-
Staples, Inc. is one of the largest suppliers of office products in the United States. It had net income of $738.7 million and sales of $24,275.5 million in 2009. Its total assets were $13,073.1...
-
Problem 8. (10.4/8) Find the velocity, acceleration, and speed of a particle with the given position function. Sketch the path of the particle and draw the velocity and acceleration vectors for the...
-
Steve, Carol, and Lisa get their first full-time jobs and talk about saving for retirement. They are each 22 years old and plan to work until they are 55. Steve starts investing immediately and puts...
-
5.3: Problem 11 Previous Problem Problem List Next Problem (1 point) Find the present value of $1126 due after 4 years if the interest rate is 2% compounded weekly. P =$ Preview My Answers Submit...
-
In reviewing sales figures, what is the popularity index? Name 3 of the 5 methods of valuing inventory and explain how each is calculated. (3) Opening inventory: $10,000 / Purchases: $5,000 / Closing...
-
Final inspection revealed that 100 tables are defective and these can be reworked requiring 2 hours a unit in addition to overhead. The 500 units are delivered and billed the customer at cost plus...
-
Sam is an investor and he got a business plan from a startup company XYZ. XYZ is a VR device company that founded years ago. In the financial statement part, Sam found the "income statement"...
-
Riley, Inc., a calendar year firm, buys equipment, signing a 3 year, $750,000, non-interest bearing note, on 9/30/20A.The equipment has a fair value at signing of $629,715.Please provide the entry...
-
4.16 Diva Manufacturing Inc. produces two products: Product A and Product B Product A is a standard product with many competitors. Product B is a new product with few competitors. Sales of Product B...
-
Marquez owns a company that produces metal fire pits and sells them for 250 00 The company s weekly profit P x can be modeled by the function P x 0 5x 40x 300 where x is the number of 1 50 price...
-
3M Company reports the following financial statement amounts in its 10-K report: a. Compute the receivables, inventory, and PPE turnover ratios for both 2018 and 2017. (Receivables turnover and...
-
What is the major purpose of: a. A balance sheet? b. An income statement? c. A statement of cash flows?
-
As many firms increasingly operate in an international economy, not only are companies having transactions with others in foreign countries, but those transactions are sometimes denominated in a...
-
Refer to the data in PE 10-11. Make the necessary journal entry (or entries) to record the first lease payment on December 31, 2012. Round amounts to the nearest penny. Data from PE 10-11 Gray...
-
NOPAT is the amount of net income a company would generate if it had no debt and held no financial assets. NOPAT is a better measure of the performance of a company's operations because debt lowers...
-
Free cash flow is the cash flow actually available for distribution to investors after the company has made all the investments in fixed assets and working capital necessary to sustain ongoing...
-
If the business were organized as a partnership or a proprietorship, its income could be taken out by the owners without being subject to double taxation. Also, if you expected to have losses for a...
Study smarter with the SolutionInn App