QUESTION 11 On 1 st January 2003, a Tanzanian manufacturer won an order to supply goods to the United States of America under a recently agreed trade cooperation between Tanzania and the USA business community at a price of US$ 20,000 with delivery and payment in three months To fulfill the order, it is necessary for the manufacture to obtain raw materials from Uganda and Kenya at a cost of UGS 10,000,000 and KES 200,000 respectively, both with payment on delivery in one month The manufacturer estimated his conversion and other cost to be TZS 5,000,000 The manufacturer arranged with his bank to cover these transactions in TZS on the forward exchange 2003 1 st January 2003 1 month forward 3 months forward TZS US$ 1,040 1,100 TZS US$ 1,045 1,115 TZS US$ 1,047 1,120 TZS KES 10 15 TZS KES 11 16 TZS KES 12 13 TZS UGS 0 50 90 TZS UGS 0 40 0 80 TZS UGS 0 35 0 75 Calculate the profit or loss made by the Tanzanian manufacturer on the order State what are thepresumed advantages for the manufacturer of entering into the forward contract with his Bank Assume that the Tanzanian manufacturer had decided not to enter such contracts Assume further that the Post Exchange rates on the dates of making payments for the raw materials and collecting the revenuefrom the USA customer were as follows On making payments for raw materials on revenue collection TZS KES 18 22 TZS US$ 900 1000 TZS UGS 0 60 0 90 Recalculate the profit or loss that would have been made by the manufacturer andcomment on the wisdom ofentering the forward contracts in this instance

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QUESTION 11: On 1 st January 2003, a Tanzanian manufacturer won an order to supply goods to the United States of America under a recently

QUESTION 11:

On 1_st January 2003, a Tanzanian manufacturer won an order to supply goods to the United States of America under a recently agreed trade cooperation between Tanzania and the USA business community at a price of US$ 20,000 with delivery and payment in three months. To fulfill the order, it is necessary for the manufacture to obtain raw materials from Uganda and Kenya at a cost of UGS 10,000,000 and KES 200,000 respectively, both with payment on delivery in one month. The manufacturer estimated his conversion and other cost to be TZS 5,000,000. The manufacturer arranged with his bank to cover these transactions in TZS on the forward exchange 2003.

1_st January 2003	1 month forward	3 months forward
TZS/US$ 1,040 1,100	TZS/US$ 1,045 1,115	TZS/US$ 1,047 1,120
TZS/KES 10 - 15	TZS/KES 11 - 16	TZS/KES 12- 13
TZS/UGS 0.50 - 90	TZS/UGS 0.40 0.80	TZS/UGS 0.35 0.75

Calculate the profit or loss made by the Tanzanian manufacturer on the order. State what are thepresumed advantages for the manufacturer of entering into the forward contract with his Bank.
Assume that the Tanzanian manufacturer had decided not to enter such contracts. Assume further that the Post Exchange rates on the dates of making payments for the raw materials and collecting the revenuefrom the USA customer were as follows:

On making payments for raw materials on revenue collection

TZS/KES 18 22 TZS/US$ 900 1000

TZS/UGS 0.60 0.90

Recalculate the profit or loss that would have been made by the manufacturer andcomment on the wisdom ofentering the forward contracts in this instance.