Changing Exchange Rates and Insurance Costs Paper

Changing Exchange Rates and Insurance Costs Paper

Please complete both portions

Knowing that the absolute exchange rate and trends in changing exchange rates can dramatically impact the firm’s profitability, the chief financial officer (CFO) has asked you for a white paper to help determine the best location for outsourcing your product’s manufacturing.

Individual Portion

Write a white paper of 700–1,000 words, plus calculations, that covers the following topics:

• In lay terminology and using no quotes, describe what exchange rates are.
• Why are exchange rates important to a firm’s CFO, investors, and customers?
• Describe and explain at least 3 causes of changing exchange rates.
• Describe the impact of changes in exchange rates on a company’s profitability. Include a numerical example to demonstrate your point.

Please add your file.

Group Portion

After completing the white paper, the CFO told you and your colleagues that the company was considering 4 different countries as possible manufacturing locations for its product, as opposed to continued manufacturing in the United States. Because the chief executive officer’s (CEO’s) decision-making style is analytical, the CFO advised you and your colleagues to draft a group white paper.

Write a white paper of 500–700 words, plus calculations, that includes the following:

• Determine, from only an exchange rate perspective, which of the 4 countries would be the better choice and why.
  • Use the data below to calculate and determine your answer.
  • Include your calculations (Wrong answers will only receive partial credit.).
  • Show the numerical calculations of why your chosen country is best.
  • Make mention of the trends in these exchange rates (including your reference source) and show graphs or charts.
  • Keep in mind that the current exchange rate is an important factor, but so is the trend in exchange rates, which could influence your recommendation. Because the payment will occur sometime in the future, the trend in the rate may cause a different sourcing location to be made.
  • Use this Web site to learn about trends in exchange rates and to convert one currency to another.

Assume the following in your calculations:

• The current U.S. manufacturing cost is $10/unit.

	Current exchange rates	Current quotes, including freight and other product, transportation, tariff, and insurance costs
Mexico	$1 = 12.392 pesos	150 pesos
Japan	$1 = 83.6184 yen	800 yen
China	$1 = 6.65891 yuan	68.5 yuan
India	$1 = 45.23 rupees	440 rupees

Please add your file.