Question: Vizor Pharmaceuticals, a U.S.-based multinational pharmaceutical company, is evaluating an export sale of its cholesterol-reduction drug with a prospective Indonesian distributor. The purchase would be

Vizor Pharmaceuticals, a U.S.-based multinational pharmaceutical company, is evaluating an export sale of its cholesterol-reduction drug with a prospective Indonesian distributor. The purchase would be for 1,650 million Indonesian rupiah (Rp), which at the current spot exchange rate of Rp9,450/$, translates into nearly $175,000. Although not a big sale by company standards, company policy dictates that sales must be settled for at least a minimum gross margin, in this case, a cash settlement of $168,000. The current 90-day forward rate is Rp9,950/$. Although this rate appeared unattractive, Vizor had to contact several major banks before even finding a forward quote on the rupiah. The consensus of currency forecasters at the moment, however, is that the rupiah will hold relatively steady, possibly falling to Rp9,400/$ over the coming 90 to 120 days. Analyze the prospective sale and make a hedging recommendation.

Step by Step Solution

3.33 Rating (153 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Given Data Assumptions Values At Spot Receivable due in 3 months in Indonesian rupiah Rp Rp165000000... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Excel file Icon

1259-B-C-F-P-V(518).xlsx

300 KBs Excel File

Students Have Also Explored These Related Corporate Finance Questions!