Determine expected rate, Cost Accounting

Bebe, a manufacturer of sophisticated and fashionable women's clothing, is completing a new assembly plant in Malaysia.  A final construction payment of 6,000,000 MYR (Malaysian Ringgit) is due in six months.  Bebe uses a 10% annual rate for its weighted average cost of capital. Today's foreign exchange and interest rate quotations are:

Present spot rate            MYR 3.3000/USD

Six-month forward rate       MYR 3.2000/USD

Malaysian interest rate      3% per annum

US dollar interest rate           6% per annum

Bebe's treasury manager, concerned about the Malaysian economy, wonders whether Bebe should be hedging its foreign exchange risk.  The manager's own forecast is as follows:

Expected rate (in 6 months or 180 days):

Highest            MYR 3.5000/USD

Expected           MYR 3.2500/USD

Lowest                  MYR 3.0000/USD

What realistic alternatives are available to Bebe for making payment?  Which method would you select and why?

Posted Date: 2/23/2013 4:20:46 AM | Location : United States







Related Discussions:- Determine expected rate, Assignment Help, Ask Question on Determine expected rate, Get Answer, Expert's Help, Determine expected rate Discussions

Write discussion on Determine expected rate
Your posts are moderated
Related Questions
meaning and definition of operating costing

explain any five qualities of accounting profession

Ed Mettway was concerned about his firm''s ability to acquire the necessary property, plant, and equipment to take advantage of steadily increasing sales. Touring Enterprises, esta

what will a $5,000,000 investment be worth at 3.5% interest compounded quarterly in 10 years?

Gustav Ltd commenced operations on 1 July 2011 and presents its first statement of comprehensive income for the year ending 30 June 2012 and first statement of financial position a

Accrued income is an amount earned although not in reality received during the accounting period or till the date of preparation of last accounts for the period concerned. The firs

When implementing ABC, once a company has identified business activities and their costs, the company will probably: A) determine a simplified single cost allocation rate B)

Vintage Auto Company manufactures parts to order for antique cars. Vintage Auto makes everything from fenders to engine blocks. Each customer order is treated as a job. Vintage Aut

Waylander Coatings Company purchased waterproofing equipment on January 6, 2013, for $320,000.The equipment was expected to have a useful life of four years, or 20,000 operating ho