Mgmt 6367 Assignment 4: There Are Four Assignment Problems P

Mgmt 6367assignment 4there Are Four Assignment Problems Please Follow

Consider a machining work cell consisting of 2 machines and 1 worker. The machines need to be adjusted before they can be used to produce a unit. The setup times and the operation times of the machines are given in the following table. Workstation Processing time per unit (in seconds) Setup Time (in seconds) A B Suppose the total walk time of the worker is 60 seconds. The total task time of the worker is 80 seconds. What is the cycle time (in seconds) of the cell? Please provide at least one step of calculation and the correct answer for full credit. (4 points)

Suppose the exchange rate between Japanese Yen and U.S. dollar is 100 ¥/$. Is this the direct quote or indirect quote from the U.S. perspective? State the reason. (4 points)

Suppose the direct quote of the nominal exchange rate between U.S. dollar and Euro increases by 2% from the U.S. perspective. The inflation rate in the U.S. is 4% and the inflation rate in France is 5%.1. What is the percentage change in the real exchange rate between US dollar and Euro? Please provide the formula, at least one step of calculation, and the correct value for full credit. (6 points)2. Is this a currency depreciation or appreciation in the U.S.? Why? (4 points)

Suppose a U.S. company contracted to sell 10,000 units of a product to a French company at a unit sales price of €2.5 with delivery in 90 days and payment due on delivery. The nominal exchange rate between U.S. dollar and Euro is 1.3 $/€ on the contract signing date. The U.S. company has the option of using a 90-day forward contract to protect itself against an adverse change in the exchange rate. Based on the assessment of the financial markets, the 90-day forward contract can be purchased at a premium of 2%.1. If no forward contract is used and the nominal exchange rate between U.S. dollar and Euro increases to 1.4 $/€ on the delivery date, how much will the U.S. company receive in terms of U.S. dollar on the delivery date? Please provide at least one step of calculation for full credit. (4 points)2. If the U.S. company chooses to use the 90-day forward contract to protect against the foreign exchange risk, how much will the U.S. company receive in terms of U.S. dollar on the delivery date? Please provide the forward rate and at least one step of calculation for full credit. (6 points)

Introduction to Financial Management 1 What is Finance? The study of fund management and asset allocation over time This can apply to: Companies (corporate finance) People (personal finance) Governments (public finance) Regardless of the subject, the goal is to understand how the decisions made today will have financial implications in the future 2 Two Most Important Elements Time Every decision made Risk Uncertainty = Risk The future is uncertain and Since finance is a forward-looking practice, 3 How Does Finance Differ from Other Fields of Study? Finance How to optimally allocate assets Forward looking Economics Analyzes the production, distribution, and consumption of goods and services Cause and effect relationships in an economic ecosystem Accounting Communicates a historical financial information “The language of business” Backward looking record of the financial condition of an entity (business, person, government) Overlap Finance, economics, and accounting overlap in a lot of areas. For example, an investor will use accounting to see whether a company has shown past financial success and to predict what the company will look like in the future. Part of that prediction incorporates economics. The investor wants to know what the overall economy will look like in the future and wants to know how the company will interact with its competitors. The investor can use finance to figure out what his or her investment will be worth in the future. There are few strong delineators between finance, economics and accounting. All three fields intermingle and influence one another. Role of Financial Management in an Organization Ultimate goal = Maximize value Value can mean several things (discussed later) Financial decision maker must determine the best course of action to take to maximize value and consider: Short-term versus long-term goals (pay a dividend or invest in R&D of new project) Different opportunities with competing resources (use $100 for either Project A or Project B) Whether the way funds are allocated create benefits that justify their use? (Internal rate of return) If an attractive opportunity exists, but the organization does not have available resources to pursue it, can the necessary funds be borrowed?

Paper For Above instruction

The given set of problems explores core concepts in operations management, international finance, and financial management, emphasizing practical calculation and conceptual understanding.

Problem 1: Cycle Time Calculation in a Machining Work Cell

The first problem involves calculating the cycle time of a machining work cell comprising two machines and one worker, with specific setup and processing times provided. The goal is to determine the optimal cycle time, considering constraints such as worker walk time and task duration.

The process starts by summing the operation times of both machines to identify the bottleneck. Suppose Machine A has a processing time of X seconds, and Machine B has Y seconds. The total processing time per unit is determined by the maximum of these, as the slowest process dictates the output rate. The setup times, walk time, and worker task time are additional factors that influence the cycle time.

Given the worker’s total walk time (60 seconds) and task time (80 seconds), along with machine setup times, the cycle time can be calculated by identifying the maximum among the adjusted machine processing times and the worker’s constraints. For example, if Machine A takes 100 seconds, Machine B takes 120 seconds, and the worker’s combined walk and task time is 140 seconds, then the cycle time is the maximum of these durations, ensuring all constraints are met. The precise calculation requires the specific processing times, but the approach involves comparing these adjusted times to find the limiting factor in production.

Problem 2: Currency Quote Interpretation

The exchange rate of 100 ¥/US$ from the U.S. perspective is a direct quote. From the U.S. vantage point, a quote expressed as foreign currency units per US dollar indicates how many units of Yen are needed to buy one dollar, fitting the definition of a direct quote, which is typically from the viewpoint of the currency in the numerator—here, the Yen.

Problem 3: Real Exchange Rate and Currency Appreciation/Depreciation

In the third problem, the percentage change in the real exchange rate (RER) is calculated using the formula:

RER = (Nominal Exchange Rate x Domestic Price Level) / Foreign Price Level

However, to find the percentage change, we utilize the formula based on inflation rates:

Percentage change in RER ≈ Percentage change in nominal exchange rate + Inflation in foreign country − Inflation in domestic country

Applying the values: if the nominal rate increases by 2% (i.e., 1.02), U.S. inflation is 4%, and France’s is 5%, then:

Percentage change in RER ≈ 2% + 5% − 4% = 3%

This indicates the real exchange rate increases by 3%, showing the U.S. dollar has depreciated relative to the Euro, meaning it now buys less foreign currency after accounting for inflation differences.

Problem 4: Foreign Exchange Risk Management

In the final problem, a U.S. firm sells goods to a French company and considers a forward contract at a 2% premium. When no forward contract is used and the spot rate rises from 1.3 $/€ to 1.4 $/€, the amount received in USD on delivery can be calculated by multiplying the euros received by the spot rate:

USD received = 10,000 units × €2.5 × Spot rate (on delivery)

which equals:

USD = 10,000 × 2.5 × 1.4 = $35,000

If the firm opts for the forward contract, the forward rate includes the premium: the forward rate = spot rate × (1 + premium) = 1.3 × 1.02 = 1.326 $/€. Using this rate, the USD amount becomes:

USD = 10,000 × 2.5 × 1.326 ≈ $33,150

This contract provides protection against adverse fluctuations, demonstrating the utility of forward contracts in foreign exchange risk management.

Conclusion

These problems collectively illustrate crucial principles of operations scheduling, foreign exchange valuation, and risk mitigation strategies fundamental to effective financial and operational management. Correct application of formulas, understanding currency quotes, and strategic use of forward contracts can significantly impact profitability and operational efficiency.

References

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