Question
Yohe Telecommunications is a multinational corporation that produces and distributes telecommunications technology. Although its corporate headquarters are located in Maitland, Florida, Yohe usually buys its
Yohe Telecommunications is a multinational corporation that produces and distributes telecommunications technology. Although its corporate headquarters are located in Maitland, Florida, Yohe usually buys its raw materials in several different foreign countries using several different foreign currencies. The matter is further complicated because Yohe often sells its products in other foreign countries. One product in particular, the SY-20 radio transmitter, draws Component X, Component Y, and Component Z (its principal components) from Switzerland, France, and the United Kingdom, respectively. Specifically, Component X costs 155 Swiss francs, Component Y costs 20 euros, and Component Z costs 120 British pounds. The largest market for the SY-20 is Japan, where the product sells for 52,500 Japanese yen. Naturally, Yohe is intimately concerned with economic conditions that could adversely affect dollar exchange rates.
Exchange Rates: Friday, August 7, 2020 | ||||
Direct Quotation: | Indirect Quotation: | |||
U.S. Dollars Required | Number of Units of | |||
to Buy One Unit of | Foreign Currency | |||
Foreign Currency | per U.S. Dollar | |||
(1) | (2) | |||
British pound | 1.3050 | 0.7663 | ||
EMU euro | 1.1787 | 0.8484 | ||
Japanese yen | 0.009440 | 10 | 5.9322 | |
Swiss franc | 1.0959 | 0.9125 | ||
Note: Column 2 equals 1.0 divided by column 1. However, rounding differences do occur. | ||||
Source: Adapted from The Wall Street Journal (wsj.com), August 7, 2020. |
Key Currency Cross Rates: Friday, August 7, 2020 | ||||||||||
USDollar | SFranc | Yen | Euro | Pound | ||||||
(1) | (2) | (3) | (4) | (5) | ||||||
United Kingdom | 0.7663 | 0.8398 | 0.007234 | 0.9032 | ||||||
Euro | 0.8484 | 0.9298 | 0.008009 | 1.1072 | ||||||
Japan | 10 | 5.9322 | 11 | 6.0911 | 12 | 4.8623 | 13 | 8.2415 | ||
Switzerland | 0.9125 | 0.008614 | 1.0756 | 1.1908 | ||||||
United States | 1.0959 | 0.009440 | 1.1787 | 1.3050 | ||||||
Note: Column 1 shows how many units of each foreign currency a U.S. dollar would buy, column 2 shows | ||||||||||
how many units a franc would buy, and so on for the other columns. | ||||||||||
Source: Adapted from data provided in Table Exchange Rates for August 7, 2020. |
Spot and Forward Exchange Rates (Number of Units of Foreign Currency per U.S. Dollar): | |||||
Friday, August 7, 2020 | |||||
Forward Rates | |||||
Forward Rate | |||||
at a Premium | |||||
Spot Rate | 30 Days | 90 Days | 180 Days | or Discount | |
Swiss franc | 0.9125 | 0.911928 | 0.910784 | 0.909072 | Premium |
Source: "Forward Rates Calculator," investing.com/tools/forward-rates-calculator, August 7, 2020. |
The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.
Download spreadsheet Multinational Financial Management-74d38a.xlsx
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How much in dollars does it cost Yohe to produce the SY-20? Round your answer to the nearest cent.
$ fill in the blank 2
What is the dollar sale price of the SY-20? Round your answer to the nearest cent.
$ fill in the blank 3
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What is the dollar profit that Yohe makes on the sale of the SY-20? Round your answer to the nearest cent.
$ fill in the blank 4
What is the percentage profit? Round your answer to two decimal places.
fill in the blank 5 %
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If the U.S. dollar was to weaken by 10% against all foreign currencies, what would be the dollar and percentage profits for the SY-20? Round your answer for the dollar profit to the nearest cent and for the percentage profit to two decimal places.
Dollar profit: $ fill in the blank 6
Percentage profit: fill in the blank 7 %
-
If the U.S. dollar was to weaken by 10% only against the Japanese yen and remained constant relative to all other foreign currencies, what would be the dollar and percentage profits for the SY-20? Round your answer for the dollar profit to the nearest cent and for the percentage profit to two decimal places.
Dollar profit: $ fill in the blank 8
Percentage profit: fill in the blank 9 %
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Using the 180-day forward exchange information, calculate the return on 1-year securities in Switzerland assuming the rate of return on 1-year securities in the United States is 4.6%. Assume that there are 360 days in a year. Round your answer to two decimal places.
fill in the blank 10 %
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Assuming that purchasing power parity (PPP) holds, what would be the sale price of the SY-20 if it was sold in the United Kingdom rather than Japan? Round your answer to the nearest penny.
fill in the blank 11
It would be greatly appreciated if somebody can answer this correctly. I need help and Im sure other need help on this as well. Take Care and God Bless.
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