Suppose DeGraw Corporation, a U. S. exporter, sold a solar heating station to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U. S. dollars? MC Calc

$929,404

Explanation:

The computation of amount that will be received is shown below:-

Once DeGraw Company sold heating station to a Japanese consumer at a price of 143,500,000 Yen, the exchange rate was $1 = 140 Yen.

 $1 = 140 Yen

1 Yen = $1 ÷ 140

= $0.00714

DeGraw decided to make the bill payable in Yen after 6 months, when the exchange rate is

$1 = 154.4 Yen

1 Yen = 1 ÷ 154.4

= $0.006476

However the price paid is 143,500,000 Yen. Now, the exchange rate has fallen to 1 Yen = $0.006476

Therefore, the dollar amount that is decided by Degraw Corporation at the time of invoice is

1 Yen = $0.006476

143,500,000 Yen = X(Assume)

(143,500,000 × $0.006476) ÷ 1

= $929,404

answerattainable;