1. The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.60/€. Based upon your economic forecast, you are pretty confident that the spot exchange rate will be $1.57/€ in three months. Assume that you would like to buy or sell €100,000. What actions would you take to speculate in the forward market? How much will you make if your prediction is correct? (Points : 3.5)
a. Take a short position in a forward. If you're right you will make $3,000.
b. Take a long position in a forward contract on euro. If you're right you will make $3,000.
c. Take a short position in a forward contract on euro. If you're right you will make $2,000.
d. Take a long position in a forward contract on euro. If you're right you will make $2,000.
2. The By-Way has sales of $435,000, costs of $254,000, depreciation of $35,000, interest expense of $22,000, and taxes of $43,400. What is the amount of the operating cash flow?
$115,600
$157,900
$137,600
$322,100
$114,340