A U.S. firm is expecting cash flows of 20 million Mexican pesos and 35 million Indian rupees. The current spot exchange rates are: $1 = 11.792 pesos and $1 = 49.204 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.118 pesos and $1 = 41.075 rupees, then what is the difference in dollars received that was caused by the delay?

Question

Quizplus · Accepted Answer

The difference in dollars received due to the delay is calculated by converting the expected cash flows at current and future exchange rates and finding the difference. For pesos: (20 million / 11.792) - (20 million / 11.118) = $0.144 million. For rupees: (35 million / 49.204) - (35 million / 41.075) = $0.096 million. Total difference = $0.144 million + $0.096 million = $0.24 million.

A US Firm Is Expecting Cash Flows of 20 Million Mexican