Question
General Motors Co. (GM) has a long business relation with Tata Steel ltd. through which GM pays in Indian Rupee for Steel it purchases from
General Motors Co. (GM) has a long business relation with Tata Steel ltd. through which GM pays in Indian Rupee for Steel it purchases from Tata. During 2013, when USD depreciated against all major currencies, GM managers decided to make a risk sharing agreement with Tata to reduce their exposures to cash flow volatilities in the future. The agreement states that GM will pay the spot rate as long as it is between INR65/USD and INR85/USD, and will share the risk of exchange rate equally with Tata if it falls outside this range. The agreement was incepted at Jan 2014 and lasts for 1 year. GM imports 10908 tons of steel each month and must pay the invoice after a month.
What would be the dollar cost of import for GM if exchange rate changes to INR55/USD after 6 month and steel price remains at 8040 Rupee per ton.(answer in two decimals, no dollar sign, no comma separator)
Answer:
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