QUESTION \#4 - Foreign Exchange Rate Primo Cafe has a long relationship with Techno-Gadgets Limited to produce the temperature and pressure gauges that go into the Caffissimo. However, Techno-Gadgets recently underwent an ownership change and since then, the quality of their products has declined. lise, Primo's CEO and founder, is in negotiations with Techno-Gadgets to resolve the issue, but, in the meantime, you have been tasked with looking for new potential suppliers. Your search has led you to two very good companies: Kyoto Teshteniss, Inc, and Allessute Engineering GmbH. Kyoto Tectonics inc. is located. in Japan and quotes you a price of 1,500 (1,500 Japanese Yen) per gauge. Allessgute Engineering GmbH is located in Germany and quotes you a price of 18.00 (18 Euro) per gauge. In order to help determine which company has the best cost structure, you have collected the following information. - Current USD/JPY exchange rate: $1=X110 - Expected USD/JPY exchange rate in six months: $1=Y90 - Current USD/EUR exchange rate: $1=C0.80 - Expected USD/EUR exchange rate in six months: $1=1.10 Marco wants to move quickly and lock up a contract with Allesgute Engineering immediately, Elise is inclined to give Techno-Gadgets six months to resolve its issues. At that point, she is interested in inking a deal with Kyoto Tectonics. Apply exchange rate calculations as presentea in class to complete the question below. Complete all calculations in the excel file that you will upload with your exam. 1. Calculate the current and future total cost for each supplier in USD. 2. Marco wants a recommendation on what Primo Caf should do. Given the information above and what you know about the product you are sourcing - what would you recommend? Why? 3. Marco and Elise are discussing international purchases and exchange rates. Elise thinks that there is too much risk in purchasing internationally, because Primo Caf will not have control of pricing due to exchange rate fluctuations. Based on the materials in MGT 337, Week 8, which type of currency risk is present in the relationship with Primo Cafe and its potential supplier (Kyoto or Allessute)? Why? \begin{tabular}{|c|c|} \hline \multicolumn{2}{|c|}{ Allesgute Engineering } \\ \hline Current & Future \\ \hline & \\ \hline & \\ \hline & \\ & \\ & \\ \hline \end{tabular}