Foreign Exchange Int-220southern New Hampshire University 02

Foreign Exchange INT-220Southern New Hampshire University 02:21:14 GMT -05:00Business MemoThis memo explains the profitability, viability, and importance of considering foreign exchange based on the scenarios below. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR with a break-even point of $90 USD.Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR toU.S. dollars. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR.This translates to (1,250,000/4,000) 312.50 MYR per unit. Using the April 1 spot rate of3.52 MYR per USD, the company would earn $88.78 USD per unit. Considering the break-even point for each unit is $90 USD, this scenario is not profitable, with a loss of$1.22 USD per unit sold for $4,800.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.Using the above calculations of 312.50 MYR per unit and the forward rate of 0.317 USD per MYR, this translates to