Knowing that the absolute exchange rate and trends in changing exchange rates can dramatically...

Question

Knowing that the absolute exchange rate and trends in changing exchange rates can dramatically impact the firm’s profitability, the chief financial officer (CFO) has asked you for a white paper to help determine the best location for outsourcing your product’s manufacturing.

Individual Portion

Write a white paper of 700–1,000 words, plus calculations, that covers the following topics:

In lay terminology and using no quotes, describe what
exchange rates
are.

Why are exchange rates important to a firm’s CFO, investors, and customers?

Describe and explain at least 3 causes of changing exchange rates.

Describe the impact of changes in exchange rates on a company’s profitability. Include a numerical example to demonstrate your point.

Please add your file.

Group Portion

After completing the white paper, the CFO told you and your colleagues that the company was considering 4 different countries as possible manufacturing locations for its product, as opposed to continued manufacturing in the United States. Because the chief executive officer's (CEO’s) decision-making style is analytical, the CFO advised you and your colleagues to draft a group white paper.

Write a white paper of 500–700 words, plus calculations, that includes the following:

Determine, from only an exchange rate perspective, which of the 4 countries would be the better choice and why.
- Use the data below to calculate and determine your answer.
- Include your calculations (Wrong answers will only receive partial credit.).
- Show the numerical calculations of why your chosen country is best.
- Make mention of the trends in these exchange rates (including your reference source) and show graphs or charts.
- Keep in mind that the current exchange rate is an important factor, but so is the trend in exchange rates, which could influence your recommendation. Because the payment will occur sometime in the future, the trend in the rate may cause a different sourcing location to be made.
- Use this Web site to learn about trends in exchange rates and to convert one currency to another.

Assume the following in your calculations:

The current U.S. manufacturing cost is $10/unit.

Current exchange rates	Current quotes, including freight and other product, transportation, tariff, and insurance costs
Mexico	$1 = 12.392 pesos	150 pesos
Japan	$1 = 83.6184 yen	800 yen
China	$1 = 6.65891 yuan	68.5 yuan
India	$1 = 45.23 rupees	440 rupees

Please add your file.

Grading Criteria
5%	Individual format: White paper of 700–1,000 words plus calculations
25%	Individual content: Answered all 4 parts of the individual task
5%	Group format: White paper of 500–700 words plus calculations
65%	Group content: Answered all 6 parts of the group task
100%	Total

Robert · Accepted Answer

Foreign Exchange Rate
Running Header: Foreign Exchange Rate
Title: Foreign Exchange Rate
Presented By:
Presented To:
Date: 14/10/2017
What exchange rate is?
Exchange rate is the rate at which currency is bought or sold. We can also describe that the exchange rate is the rate at which currency can be converted to another currency. Globalization has opened up markets of various countries for selling products/services or buying goods and services from. Organizations started expanding to external markets for increasing the market share and its top line and started buying cheaper goods and services and capital assets for increasing the bottom line. Except for isolated cases, most the places the sale and purchases happen in the local currency of the country and would lead to revenue and expenditure occurring in foreign currency. Sound accounting practices or Accounting standard (IAS 21 effects of changes in foreign exchange rates) requires the transactions to be converted into presentation currency from the functional current to consolidate and show all the transactions. Even remittances of money also take place from time to time. Such conversion and remittances would lead to foreign exchange profit and loss (including translation profit and loss) and impacting the organisations economic results. Apart from the operating transactions, 
Why important for CFO, investors and cutomers?
Financing (lending or borrowing) and investing transactions (buying and selling assets) and activities also given rise to foreign exchange profit and loss.

Knowing that the absolute exchange rate and trends in changing exchange rates can dramatically impact the firm’s profitability, the chief financial officer (CFO) has asked you for a white paper to...

Answer To: Knowing that the absolute exchange rate and trends in changing exchange rates can dramatically...

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