Lawrence Company, a U

question 40

Multiple Choice

Lawrence Company, a U.S. company, ordered parts costing 1,000,000 Thailand bahts from a foreign supplier on July 7 when the spot rate was $0.025 per baht. A one-month forward contract was signed on that date to purchase 1,000,000 bahts at a rate of $0.027. The forward contract is properly designated as a fair value hedge of the 1,000,000 baht firm commitment. On August 7, when the parts are received, the spot rate is $0.028. What is the amount of accounts payable that will be paid at this date?

• A) $20,000.
• B) $20,100.
• C) $25,000.
• D) $27,000.
• E) $28,000.

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Definitions:

Tornado Charts

A type of sensitivity analysis graph that displays the impact of varying inputs on an output variable, often used in decision-making.

Crystal Ball

Software used for predictive modeling, forecasting, simulation, and optimization.

Sensitivity Charts

Visual tools that display how changes in input variables affect the output of a model, commonly used in decision analysis.

Cumulative Net Profit

The total amount of profit or loss made over a given period after all expenses are taken into account.