Module Four Assignment Guidelines and Rubric

INT‐220‐J7483 Global Dimensions in Business 23EW3 MA

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Overview

Foreign exchange impacts the profitability of transac�ons in interna�onal markets. It can turn a profitable business into one that loses money and can turn an unprofitable business into one that makes money.

In this assignment, you will analyze the impact of foreign exchange on different business scenarios and present your findings in a short business memo.

Scenario

You manage the interna�onal business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your

products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day a�er

April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for

exactly 1.25 million MYR for the first quarter. The break‐even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates:

• On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year.

• On April 1, the daily spot rate is 3.52 MYR.

Prompt

Using the informa�on above, create a short business memo that explains the profitability, viability, and importance of considering foreign exchange on the basis of the scenarios below.

Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR to U.S. dollars.

Scenario 2: On January 1st, the company uses that day’s forward rate today to lock in a foreign exchange rate for its expected 1.25 million MYR in sales. This means the company agreed to exchange 1.25 million MYR

using the forward rate on January 1st when April 1 arrives.

Scenario 3: Another op�on for the company is to spend the foreign currency and avoid any currency exchange. Because it is a manufacturing company, raw materials are always needed.

Specifically, you must address the following rubric criteria:

• Foreign Exchange Calcula�ons: Determine the profitability of the interna�onal business by using foreign exchange calcula�ons for the first and second scenarios.

• Spend or Save: Discuss what you would need to consider when determining if the company should buy raw materials with the foreign currency in an effort to avoid foreign exchange risk and whether this is a

viable op�on for the company.

• Conclusion: A�er determining the result for each scenario, explain the importance to a company’s financial results of considering foreign exchange risk.

Guidelines for Submission

Submit this assignment as a 250‐ to 300‐word Microso� Word document. Sources should be cited according to APA style.

Module Four Assignment Rubric

Criteria Exemplary (100%) Proficient (85%) Needs Improvement (55%) Not Evident (0%) Value

Foreign Exchange Calcula�ons Exceeds proficiency in an

excep�onally clear, insigh�ul,

sophis�cated, or crea�ve manner

Determines the profitability of

the interna�onal business by

using foreign exchange

calcula�ons

Shows progress toward

proficiency, but with errors or

omissions; areas for

improvement may include

performing foreign exchange

calcula�ons correctly

Does not a�empt criterion 40

Spend or Save Exceeds proficiency in an

excep�onally clear, insigh�ul,

sophis�cated, or crea�ve manner

Analyzes the viability of

spending the foreign currency

instead of exchanging it

Shows progress toward

proficiency, but with errors or

omissions; areas for

improvement may include

iden�fying more elements that

can complicate the process of

ge�ng raw materials to the

company’s factories

Does not a�empt criterion 20

Conclusion Exceeds proficiency in an

excep�onally clear, insigh�ul,

sophis�cated, or crea�ve manner

Makes conclusions about the

importance to a company’s

financial results of foreign

Shows progress toward

proficiency, but with errors or

omissions; areas for

Does not a�empt criterion 20

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sophis�cated, or crea�ve manner financial results of foreign

exchange risk

omissions; areas for

improvement may include

making conclusions that align

with foreign exchange

calcula�ons and using the break‐

even point in analysis

Ar�cula�on of Response Exceeds proficiency in an

excep�onally clear, insigh�ul,

sophis�cated, or crea�ve manner

Clearly conveys meaning with

correct grammar, sentence

structure, and spelling,

demonstra�ng an understanding

of audience and purpose

Shows progress toward

proficiency, but with errors in

grammar, sentence structure,

and spelling, nega�vely

impac�ng readability

Submission has cri�cal errors in

grammar, sentence structure,

and spelling, preven�ng

understanding of ideas

10

Cita�ons and A�ribu�ons Uses cita�ons for ideas requiring

a�ribu�on, with few or no minor

errors

Uses cita�ons for ideas requiring

a�ribu�on, with consistent

minor errors

Uses cita�ons for ideas requiring

a�ribu�on, with major errors

Does not use cita�ons for ideas

requiring a�ribu�on

10

Total: 100%

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