Suppose Your Company Imports Computer Motherboards from Singapore

question 44

Multiple Choice

Suppose your company imports computer motherboards from Singapore.The exchange rate is currently 1.5803S$/US$.You have just placed an order for 30,000 motherboards at a cost to you of 170.90 Singapore dollars each.You will pay for the shipment when it arrives in 120 days.You can sell the motherboards for $148 each.What will your profit be if the exchange rate goes up by 8 percent over the next 120 days?

• A)$913,564
• B)$1,008,121
• C)$1,216,407
• D)$1,435,999
• E)$1,502,400

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Definitions:

WACC

stands for Weighted Average Cost of Capital, which is a calculation of a firm's capital cost from all sources, including equity and debt, weighted accordingly.

Capital Asset Pricing Model

A model used to determine the theoretical rate of return of an asset, considering risk and the time value of money.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertook by investing their capital.

WACC

Weighted Average Cost of Capital, a calculation that reflects the cost of a company to finance its assets through a mix of equity and debt.