Abnormal Deviation in international exchange Essay

You are a Finance Manager at a company in your city. Your company purchase goods from global markets. You are mean to buy equipment worth AED55 million. You have decided to save the company nigh money and you have proposed to check the ex tack step for 5 sidereal days at www.xe.com for the bills of the country where you want to buy the equipment.You managed to secure deuce acknowledgements from different suppliers from different countries using different currencies. The equipment is needed in January 2015. merchant marine appeal AED5 million and is paid in here to a UAE acid company. The balance amount should be used to purchase the equipment. The transportation of the equipment is agree to be arriving in UAE on the 5th of January 2015. It takes 3 days to fly ball the equipment to UAE. Whatever purchasing you are planning should be done in advance to give room for transporting the equipment.See more Satirical raise about drugsThe foreign supplier has agreed to give you a quotation for the equipment that is valid for 7 days. You want to take advantage of the quoted outlays. The Equipment is quoted in some(prenominal) British pounds and in Euros. The Equipment is hailing BP860 000 and it is also quoted in EURO 1 090 000. You had a meeting with your CEO and you both agreed to check the market implementation of these two currencies and purchase the equipment when it is giving you a competitive advantage.The Activities to do jeer the trade rate for a period of 5 days and pull in a t adequate of comparisons of how much will be your Dh50m worth on each of the five days in both Euros and GB pounds. exact the currency you will use for your transactions. 15 marksCalculate how much it will constitute the company in Dirhams to buy the equipment on the first day of monitor the transfigure rate. Explain the impingement of your action. 15 marksCalculate how much it will represent the company in Dirhams to buy the equipment on the second day of monitor the exchange rate. Explain the impact of your action. 15 marksCalculate how much it will cost the company in Dirhams to buy the equipment on the third day of observe the exchange rate. Explain the impact of your action. 15 marksCalculate how much it will cost the company in Dirhams to buy the equipment on the fourth day of monitor the exchange rate. Explain the impact of your action. 15 marksCalculate how much it will cost the company in Dirhams to buy the equipment on the fifth day of observe the exchange rate. Explain the impact of your action. 15 marksWrite a report to oblige your ratiocination for the transaction you have done. In your recommendation outline what makes your decision the best decision for the company. Consider every day you were monitoring the currencies, as the day you made a decision and purchased that equipment. Was that the best decision and wherefore? 10 marksSolutionTable of comparisonConversion of DH to GBP1dh = 0.173796 GDP50,000,000 0.173796GBP = 8,689,800Conversion of DH to EURO1DH = 0.221629 EURO50,000,000 0.221629EURO = 11,081,450 changeDays survey ofEURO(+ 1.44) Change in value % change Value of POUND (+0.3885) Change in value % change1 11,241,023 159,573 1.44 8,723,516 33,716 0.3882 11,402,894 161,870 1.46 8,757,363 33,747 0.3903 11,567,096 164,202 1.48 8,791,342 33,979 0.3914 11,733,663 166,566 1.50 8,825,452 34,110 0.3935 11,902,627 168,965 1.52 8,859,695 34,243 0.394Will use EURO as my currency in the transactions.Cost of the equipments on the first day in DH.101.44100 1,090,000 = 1,105,6961 DH = 0.2216291,105,696 0.221629= DH 4,988,950. blowThe exchange rate take a leak a positive impact in divergency in the price of equipment with an annex of DH 75,300.Cost of the equipments on the second day in DH.Purchases costed = 1,090,000100 + 1.46%= 101.46%101.46100 1,090,000 = 1,105,9141 DH = 0.2216291,105,914 0.221629=DH 4,989,934ImpactThe exchange rate create a positive impact in difference in the price of equip ment with an increase of DH 76,284.Cost of the equipment on the third day in DHPurchases costed = 1,090,000101.48100 1,090,000 = 1,106,1321 DH = 0.2216291,106,132 0.221629=DH 4,990,917ImpactThe exchange rate create a positive impact in difference in the price of equipment with an increase of DH 77, 267.Cost of the equipment on the fourth day in DHPurchases costed = 1,090,000101.50100 1,090,000 = 1,106,3501 DH = 0.2216291,106,350 0.221629=DH 4,991,901ImpactThe exchange rate create a positive impact in difference in the price of equipment with an increase of DH 78,251.Cost of the equipment on the fifth day in DHPurchases costed = 1,090,000101.52100 1,090,000 = 1,106,5681 DH = 0.2216291,106,568 0.221629=DH 4,992,885ImpactThe exchange rate create a positive impact in difference in the price of equipment with an increase of DH 79,235.REPORT ON DECISION FOR TRANSACTION FOR PURCHASING EQUIPMENTSThe above transaction was appropriate since it has brought a good comparison between t he exchange rate in both quotations AED/EURO.FindingsIt can be observed that by use of this transaction the finance manager can be able to save for the company. The transaction of this equipment will take less than AED 50 millions terminusThis method is best used when carrying out official transaction for simulation which government is involved.RecommendationThis kind of transaction should be encouraged since it attention in stabilizing the country currency. We find that the effect of exchange rate behave differently in the five days meaning that in each an everyday the currency get an additional value. It hence strengthens currency.ReferencesThe massive Soviet Encyclopidia, 3rd edition (1970 1979).2010. The gale group, IncCassel Guster (DSecember 1918) Abnormal Deviation in international exchange, 28, No 112. The economic journal. Pp.413 415.UBSS prices and earnings report.Source document