Mango Enterprises Ltd (MEL) is an import export company based in Dar es Salaam. On February 28th, the company contracted to buy 1,500 tons maize from Malawi at a price of Kwacha 1,820 per ton, MEL has arranged that shipment of the product will be made directly to a customer in Uganda who has bought the maize at Ushs. 4620 per ton. Of the total quantity, 500 tons will be shipped during March and the balance by the end of April. Payment to the suppliers is to be made immediately on shipment, whilst one-month credit from the date of shipment is allowed to the Ugandan customer. Assume MEL arranges with its bank to cover these transactions in Tshs on the forward exchange market for which the exchange rates as at 28th February being those given below:

Kwacha Ushs Spot 1.0745 - 1.0775 3.84 - 3.88 month forward 5 1⁄2 - 10 1⁄2 c dis 2 1⁄2 - 1 1⁄2 c premium month forward 7 1⁄2 - 17 1⁄2 - c dis 4 - 3 c premium month forward 10.6 - 25 c dis 6 1⁄2- 5 1⁄2 c premium

The bank charges an exchange commission of Tshs. 10,000 on each transaction. 

Required: Calculate the profit or loss MEL will make on the transaction

Answer rating: 100% (QA)

To calculate the profit or loss that Mango Enterprises Ltd MEL will make on the transaction we need to consider the following factors Cost of purchasi... View the full answer