XYZ is a multinational company headquartered in Singapore that engages in diverse activities, including the production of electronic tools such as handheld digital electronic microscopes, digital multimeters, voltage testers, and more. To support its manufacturing operations, the company imports electronic components from countries like Japan and South Korea. The company sells its products in markets such as Australia, Canada, and the United Kingdom, with the majority of sales occurring in Australia. As a result, XYZ has established a subsidiary in Australia to facilitate the resale and distribution of its products to various businesses. The quarterly net profit after tax generated by the subsidiary is AUD500,000. In addition to the Australian market, XYZ exports its products to Canada and the United Kingdom through independent distributing companies, which purchase the tools at wholesale prices from XYZ. To further streamline its operations and mitigate risks and costs, XYZ is actively exploring the possibility of constructing an electronic component manufacturing plant in Singapore. By establishing a local manufacturing facility, XYZ aims to eliminate the need for importing electronic components from countries like Japan and South Korea. This strategic move would enhance supply chain efficiency and bolster the company's competitive advantage in the market. XYZ already possesses ample manufacturing space and is well-prepared to embark on its expansion plans. To facilitate this, the company intends to import manufacturing equipment worth 740,000,000 WON from South Korea. The installation of the machinery will be undertaken by local Singaporean companies, incurring a cost of SGD2,000,000. With the necessary manufacturing space already in place, XYZ's focus is now on acquiring the essential equipment and partnering with local experts for the installation process. This approach ensures a seamless transition and allows XYZ to efficiently leverage its existing infrastructure for the establishment of the electronic component manufacturing plant. The Chief Executive Officer (CEO) of XYZ, requests the following information to assist him with determining the extent of exchange rate risk and the availability of funds to conduct the multinational transactions: 1. The CEO has requested a forecast of the SGD/AUD exchange rates for both a two-year and four-year time frame. These projections will be calculated based on two commonly used economic indicators: Purchasing Power Parity (PPP) and the International Fisher Effect (IFE). To perform this analysis, the following existing information will be utilized: Current SGD/AUD spot exchange rate SGD$0.95/AUD Expected annual Singapore inflation 1.23% Expected annual Australia inflation 0.85% Expected Singapore one-year interest rate 0.258% Expected Australia one-year interest rate 0.106%

XYZ is a multinational company headquartered in Singapore that engages in diverse activities, including the production of electronic tools such as handheld digital electronic microscopes, digital multimeters, voltage testers, and more. To support its manufacturing operations, the company imports electronic components from countries like Japan and South Korea. The company sells its products in markets such as Australia, Canada, and the United Kingdom, with the majority of sales occurring in Australia. As a result, XYZ has established a subsidiary in Australia to facilitate the resale and distribution of its products to various businesses. The quarterly net profit after tax generated by the subsidiary is AUD500,000. In addition to the Australian market, XYZ exports its products to Canada and the United Kingdom through independent distributing companies, which purchase the tools at wholesale prices from XYZ. To further streamline its operations and mitigate risks and costs, XYZ is actively exploring the possibility of constructing an electronic component manufacturing plant in Singapore. By establishing a local manufacturing facility, XYZ aims to eliminate the need for importing electronic components from countries like Japan and South Korea. This strategic move would enhance supply chain efficiency and bolster the company's competitive advantage in the market. XYZ already possesses ample manufacturing space and is well-prepared to embark on its expansion plans. To facilitate this, the company intends to import manufacturing equipment worth 740,000,000 WON from South Korea. The installation of the machinery will be undertaken by local Singaporean companies, incurring a cost of SGD2,000,000. With the necessary manufacturing space already in place, XYZ s focus is now on acquiring the essential equipment and partnering with local experts for the installation process. This approach ensures a seamless transition and allows XYZ to efficiently leverage its existing infrastructure for the establishment of the electronic component manufacturing plant. The Chief Executive Officer (CEO) of XYZ, requests the following information to assist him with determining the extent of exchange rate risk and the availability of funds to conduct the multinational transactions: 1. The CEO has requested a forecast of the SGD/AUD exchange rates for both a two-year and fouryear time frame. These projections will be calculated based on two commonly used economic indicators: Purchasing Power Parity (PPP) and the International Fisher Effect (IFE). To perform this analysis, the following existing information will be utilized: Page 2 of 6