Your US-Based Company Is Selling Parts to a Company in Chile

question 45

Multiple Choice

Your U.S.-based company is selling parts to a company in Chile and the company will pay you 9.8 million pesos in 3 months. The current exchange rate is 490 pesos/US$. If the exchange rate at the time of payment is 510 pesos/US$

• A)you earn additional profit.
• B)the Chilean company will end up paying more for the goods.
• C)the Chilean company will end up paying less for the goods.
• D)you earn less profit.

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Definitions:

Mutually Exclusive

Situations or decisions that cannot occur simultaneously; selecting one option precludes the choice of the other.

Net Present Value

The difference between the current value of cash inflows and the current value of cash outflows over a period of time; used to evaluate the profitability of an investment.

Internal Rate of Return

The interest rate that brings the net present value of all incoming and outgoing cash flows from an investment or project to a neutral point of zero.

Excel Spreadsheets

A software program used for data organization, analysis, and storage in tabular form.