Assume Your Company Has a Contract to Purchase 100,000 Computers

question 153

Essay

Assume your company has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on December 31, 2015. In July 2015, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in July 2015 is $1 in exchange for 1,250 won.
I. Calculate the U.S. dollar price (in July 2015) of one unit of Korean currency.
II. What is the total price of the computers in dollars?
III. What is the total price of the computers in won?
IV. What would you advise your firm to do to avoid a loss on the deal if the Korean won costs 10% more compared with the U.S. dollar when payment is due in December?

Comprehend the significance of fluid and crystallized intelligence in cognitive assessment.

Understand the concept and importance of maintaining an appropriate level of current assets in relation to sales through different financial policies.

Recognize the impact of flexible and restrictive short-term financial policies on a firm's financial health and its ability to meet short-term obligations.

Comprehend the significance of short-term financial management tools like cash budgets in identifying financial needs.

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Definitions:

Tacit Intelligence

The unspoken, practical skill set and knowledge that individuals acquire through personal experience rather than formal education.

Crystallized Intelligence

The ability to use skills, knowledge, and experience, which does not correlate with a person's fluid intelligence but tends to increase with age.

Undergraduate GPA

The cumulative grade point average of a student in an undergraduate program, reflecting their academic performance across all courses.

Accumulated Knowledge

refers to the body of information and understanding one has gathered over time through experience or education.