Question
12. Compute exchange rates, FX appreciations, and USD profits below of this U.S.-based company that makes autoparts in China (paying CNY) and sells to
12. Compute exchange rates, FX appreciations, and USD profits below of this U.S.-based company that makes autoparts in China (paying CNY) and sells to Germany (receiving EUR). Foreign revenues and costs increase with foreign country inflation. Compute profits under two scenarios (1) the exchange rates at T=1 are equal to PPP forecast, or (2) the actual T-1 exchange rates provided below. Revenues in EUR T=0 Costs in CNY T=0 USDCNY T=0 Actual 1,000,000 6,000,000 6.50 USDCNY T=1 Actual 6.80 EURUSD T=0 Actual $ 1.1050 EURUSD T=1 Actual $ 1.0524 U.S. Inflation 0.00% China Inflation 25.00% Germany Inflation 5.00% USDCNY T=1 PPP ???? EURUSD T=1 PPP ???? USDCNY Real Rate T=1 ???? EURUSD Real Rate T-1 ???? CNY Real Appreciation ????? EUR Real Appreciation ????? Revenues in EUR T=1 with German infl. ????? Costs in CNY T-1 wich China inflation ????? Profits if FX rates = PPP forecasts T=0 T=1 % Change Revenue (USD) ???? ???? #VALUE! Costs (USD) ???? ???? #VALUE! Profit (USD) ???? ????? #VALUE! Profits if FX rates = Actual FX rates T=0 T=1 % Change Revenue (USD) ???? ???? #VALUE! Costs (USD) ???? ???? #VALUE! Profit (USD) ???? ???? #VALUE!
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Public Finance An International Perspective
Authors: Joshua E. Greene
1st Edition
9789814365048
