foreign exchange

Project Description:

adb, a canadian company, has signed a contract to supply and install air conditioning equipment to a hotel chain in a middle eastern country. adb has calculated the cost of manufacture and installation to be $640,000 (canadian dollar) and the contract will take 12 months to complete. the company typically adds a 20% profit margin to the cost to determine the selling price (estimated selling price for this contract will be $768,000 (canadian dollar)). the contract states that payment will be made in the local currency (flc) after completion of the project one year from now. the company does not always hedge its exchange rate risks, especially with trades in the usa. some managers of adb believe there is no merit in hedging currency risk with any of their contracts. the spot exchange rate is flc 5.89 to 1 cad. the local currency (flc) has weakened by 20% to the canadian dollar over the last year. however, some managers feel that this trend will be reversed during the coming year. one of the countries bordering the country with which adb is dealing has recently imposed restrictions on the monies that can be sent overseas to foreign investors. if adb is to extend its operations in this region the restrictions may prove problematic.
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Project Stats:

Price Type: Fixed

Project Budget: $0 to $10
Total Proposals: 5
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