Finance Assignment | Professional Writing
Data is shown below. Please answer the following: This is the COST in MXN for Ford’s production Net Cash Flow (MXN) 1,500,000,000 Note: USD-MXN is the cost of 1 USD in MXN Spot price Spot Price Forward 1/1/2020 3/31/2020 3M quote USD-MXN USD-MXN 1/1/2020 18.902 23.9719 225.32 Data: Part 1. How much in USD would it have cost Ford to buy the MXN (Net Cash Flow) at the start of the first quarter of 2020 (Q1 20, 1/1/20)? Answer: $ 79,356,681.83 0.268220294 Part 2. If Ford did NOT hedge, how much in USD would it have cost Ford to buy the MXN (Net Cash Flow) at the end of Q1 20 (3/31/20)? Answer: $ 62,573,262.86 Part 3: What is the difference in USD AND as a percentage of the original cost (Part 1.) that Ford would have incurred had it NOT hedged? 0.26822 Difference USD % Diff $ (16,783,418.97) -21.1%
Answers: Part 4: Over the first Quarter of 2020 the MXN has done what and by how much against the USD? Appreciate/Depr? Answers: depreciate %Chg -21.1% Note: if appreciate this should be a positive %, if depreciate this should be a negative % Part 5: Ford DID Hedge though, by entering into a 90-day Forward contract at the rate quoted above. What is the Forward rate? Answer: NOTE: FOR THE MXN THE FORWARD QUOTE SHOULD BE MULTIPLIED BY 0.01 AND ADDED TO THE SPOT RATE (NOT 0.0001) Part 6: With the Forward contract how much in USD will it cost Ford to buy the MXN? Answer: Part 7: How much in USD did Ford “overpay” or “underpay” by hedging? Answers: Hedged Cost Unhedged Cost Indicate here if Ford “overpaid” or “underpaid”
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