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You are invited to consult to the CFO of a US non-financial company regarding designing and implementing hedging strategy. Company is exposed a great deal to price fluctuation in commodity markets as it purchases materials for its production that are closely related to a traded commodity. This material represents 72% of the price of its final products. At current prices (!), annual sales level of the company amounts to USD 650 mln. Other components of the P&L are as follows. Direct labor cost is at the level of 13% of the final product, and overhead (OH) costs amount to USD 45.5 mln p.a.. Other direct materials (variable) costs represent 5% of annual sales. Company is unindebted.
1. Select one of the traded commodities (i.e. corn, alu, copper, cocoa, iron ore, ...) to which the above hypothetical company is exposed (i.e. its material prices - 72% of sales - correlate to the traded commodity), and fetch the (spot prices!) data from the data vendor (you can freely select any you find available; e.g. Index-mundi, Yahoofinance, markets.businessinsider.com with monthly, weekly or daily frequency). This traded commodity should be quoted in USD. We need to create time series of the cost of the corelated material, whereby you use properties of the selected commodity.
A project has sales of $100 per year forever. Costs will be $54 the Fust year and will increase by 8% every year. Ignoring taxes, what is the NPV at 10%.
Suppose that the euro falls in value relative to the dollar. What is the likely effect on European exports to the United States? What is the likely effect on U.S. exports to Europe?
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What is really happening in these situations? Is there a different way of looking at it or not? Is perspective important.
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Lisa a homeowner was looking for someone to paint and do some general work around her home. She received several bids from different companies.
A funeral home has $90,000 accounts receivable, $50,000 of that is concurrent, $10,000 is in 30 to 60 day column, and $20,000 is in the 60 to 90 day column, and $10,000 is over 90 days. What percent of the accounts receivable is past due?
Give your views keeping in mind the cost involved in implementing CRM and enhancing business also.
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