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Analysis of the change in foreign exchange rate of US dollar against any currency of emerging market Answer

Introduction

The objective of the paper is to analyze the change in foreign exchange rate of US dollar against any currency of emerging market. The currency selected against US dollar is Chinese Yuan. The change in two currency rates for 5 years starting from 2006 to 2010 has been included.   The impact of appreciation and depreciation of currency for importers and exporters has also been discussed. The FXI ETF has been selected for impact of change in currency rate on investment made. The impact of currency rate for borrower has also been included.

Analysis

Year End Rate 2006 2007 2008 2009 2010
US $ to Chinese Yuan 0.1281 0.1369 0.1465 0.1465 0.1517
Trend in % 100% 106.87% 114.36% 114.36% 118.42%
           
Yuan to US $ 7.8075 7.3046 6.824 6.828 6.5916
Trend in % 100% 93.56% 87.40% 87.45% 84.43%

 

During the five year of analysis, the value of Chinese currency has appreciated while the value of US $ has depreciated. The Chinese currency increased by around 18% in 5 years time period, while the US $ has declined by around 6% from 2006 to 2010.

The above changes would be beneficial for the exporters of US and Importers of China and vice versa. For example if goods worth $100000 would have been sold from China to USA, the value of the $100000 will be equal to 780750 Yuan (100000*7.8075. The value of this $100000 would have declined for Chinese exporters in the following manner.

2006 780750
2007 730460
2008 682400
2009 682800
2010 659160

 

The above value will be beneficial for the importers of China as the payment would be declined from 780750 Yuan to 659160 in 5 years time period, therefore the goods worth of $100000 would be lower for Chinese importer.

iShares FTSE China 25 Index Fund (FXI)          
Year Price In $ Converted to Yuan Value on 2010 in Yuan Total Return Annualized Return
2006 31.51 246.014 207.701 -38.31 -3.89%
2007 41.21 301.023 271.640 -29.38 -2.44%
2008 65.91 449.770 434.452 -15.32 -0.85%
2009 102.15 697.480 673.332 -24.15 -0.87%
2010 120.45 793.958 793.95822 0.00 0.00%

 

Note: The ETF price for 2008 has been multiplied by 3 as there was stock split for 3 to 1 before the end of 2008.

FXI is an ETF which was listed on New York Stock Exchange on October 05, 2004. It is a Non-Equity Investment Instrument. The above table shows that if the investment would have been made in this security, the value of $31.51 would be equal to 246.014 Yuan and by the end of 2010 the value of this equity would have gone down to 207.70 Yuan, which is showing a decline of around 4% of investment made by the Chinese investors. It is quite apparent that the investment has been showing declining trend in all the years for Chinese investors. The analysis does not include the increase in value of security in dollars; the analysis has just focused on the impact due to change in foreign currency rate. However the overall impact of investment in ETF due to change in price in dollars and also due to change in foreign currency rate has been shown in table given below:

 Year Price In $ Converted to Yuan Value on 2010 in Yuan Total Return Annualized Return
2006 31.51 246.014 793.958 547.94 55.68%
2007 41.21 301.023 793.958 492.94 40.94%
2008 65.91 449.770 793.958 344.19 19.13%
2009 102.15 697.480 793.958 96.48 3.46%
2010 120.45 793.958 793.958 0.00 0.00%

 

The above analysis shows that the value of ETF was $31.51 in 2006 which is equal to 246.014 but by the end of 2010, the value of ETF would have increased to $120.45 and 793.958 Yuan therefore any investment would have been made in 2006 would have earned around 55.68% annually and so on. Therefore it may be conclude that the Chinese investors would be in profit if both factors are considered. The change in dollar value depends on the performance of the ETF itself while the change in foreign currency is not based on the performance of the ETF. If the ETF would have not performed better the Chinese investors would have lost the money due to appreciation of Chinese Yuan against US dollar.

However, the appreciation of Chinese currency would be beneficial for the borrower of Chinese businessmen, assuming that the interest rates of both countries are the same to see the impact of change in foreign currency for borrowers. For example, if $100000 would have been borrowed this is equal to 780750 Yuan. The following table shows the cost if the principal and interest would have been repaid in dollars and Yuan:

Yield to Maturity Cash Flows in
Year Dollar Yuan
Start of 2006 -100000 -780750
End of 2006 6000 46845
End of 2007 6000 43828
End of 2008 6000 40944
End of 2009 6000 40968
End of 2010 106000 698710
YTM 6% 2.48%

 

It is quite apparent that the cost of borrowing in US $ is higher than cost of borrowing to be repaid by the Chinese borrower due to change in exchange rate.

Conclusion

It may be concluded easily that the appreciation of Chinese Yuan will benefit the importer and borrower of the China and the depreciation of US dollar will benefit the importer and investors of US, if the interest rates of the two countries are the same. However, the investors may also benefit from investment if the performance of selected security is outstanding which can offset the impact of decline in value of investment due to appreciation of currency.

References

http://www.x-rates.com/historical/?from=CNY&amount=1&date=2010-12-31

http://etf.stock-encyclopedia.com/category/china-etfs.html

http://www.nyse.com/about/listed/fxi.html

http://finance.yahoo.com/q/hp?s=FXI&a=11&b=31&c=2006&d=00&e=16&f=2011&g=m

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Is it possible to shorten the critical path and save money Answer

Is it possible to shorten the critical path and save money? Explain how.

The critical path is the path with the longest duration through the network and involves all the projects which will delay the project by the same amount of time of their delay (Larson & Gray, 2011, p. 160). The critical path is the longest path and identifies the end of the project. The slack for the project is computed through the forward pass and backward pass technique. When the late finish equals the early finish, the activities on the critical path are those that also have a late finish that equals their early finish (Larson & Gray, 2011, p. 169). When Late finish equals early finish there is no slack in the activity. Therefore they must be part of the critical path because any delay in those activities would delay the project by the same amount of time.

Larson, E. W., & Gray, C. F. (2011). Project management, the managerial process. (5th ed. ed.). New York, NY: Irwin Professional Pub.

 

The schedule is something you will want to keep close watch on during the project. What are some examples of when you would want or need to reduce the project’s duration? Would there be any concerns you might want to consider when discussing the possibility of shortening the project?

Perhaps a time you would want to shorten a project’s duration is if you are in a business that has a competitor with a similar project in the works and you want to beat them to the punch. Another reason could be cost, if the budget is getting out of hand shortening the time will help that.

High tech business is the perfect example of beating another company to the punch. High tech evolves so fast that they are willing to pay out more in production to get their product on the shelf faster.   A great example of this is the fall of Circuit City. Two years ago Circuit City put all of their eggs in one basket so to speak. They planned on selling a flat screen TV for their big Christmas push. Months before Christmas they invested an immense amount of capital in the TV’s that were at the time going to be sold cheaper that everyone else.

Unfortunately for them, several other companies found out Circuit Cities plan and accelerated production of their TV’s getting them on the shelves just in the nick of time and far cheaper than Circuit City. This forced Circuit City to sell the TV’s at little or no profit to get them off the shelf and ultimately along with some other poor choices put the company out of business.

An example of an instance that may require reduce a projects duration is when you want to make certain that your company is the first to hit market with a concept and the awareness of a competitor has come about. More than likely, depending on the product, consumers will not be interested in repeat purchasing.

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Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji Answer

Westcost Air Co. leases a single jet aircraft and operates between San Francisco and the Fiji. Flights leave San Francisco on Mondays and Thursdays and depart from Fiji on Wednesdays and Saturdays. Westcost Air Co. cannot offer any more flights between San Francisco and Fiji. Only tourist-class seats are available on its planes. An analyst has collected the following information:              Seating capacity per plane                                      380

passengers              Average number of passengers per flight                    175

passengers              Flights per week                                                        4 flights              F

lights per year                &nb sp;                                    208 flights              Average one-way fare                  ;                          $325              Variable fuel costs                                         $14,000 per flight              

Food and beverage service costs                                $4 per passenger                 (no charge to passenger)              C

ommission to travel agents paid by Air Frisco            10% of fare                 (all tickets are booked by travel agents)              

Fixed annual lease costs allocated to each flight     $53,000 per flight              

Fixed ground services (maintenance, check in,                 baggage handling) costs allocated to each flight   $7,500 per flight              F

ixed flight crew salaries allocated to each flight      $7,000 per flight  Required:    

 1.        Calculate the operating income that Westcoast Air earns on each one-way flight between San Francisco and Fiji.     

2.        The Market Research Department of Westcoast Air indicates that lowering the average one-way fare to $280 will increase the average number of passengers per flight to 212. Should the company lower its fare? Show your calculations.     

3.        Travel International, a tour operator, approaches Westcoast Air on the possibility of chartering (renting out) its jet aircraft twice each month, first to take Travel International’s tourists from San Francisco to Fiji and then to bring the tourists back from Fiji to San Francisco. If Westcoast Air accepts Travel International’s offer, Westcoast Air will be able to offer only 184 (208 – 24) of its own flights each year. The terms of the charter are as follows: (a) For each one-way flight, Travel International will pay Westcoast Air $75,000 to charter the plane and to use its flight crew and ground service staff; (b) Travel International will pay for fuel costs; and (c) Travel International will pay for all food costs. On purely financial considerations, should Westcost Air accept Travel International’s offer? Show your calculations. What other factors should the company consider in deciding whether or not to charter its plane to Travel International?  Summarize your findings in a report which answers the above questions.

 

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What are the components of the audit risk model? How does the audit risk model impact an audit plan? Answer

What are the components of the audit risk model? How does the audit risk model impact an audit plan?

The three components of audit risk are referred to respectively as inherent risk [IR], control risk [CR] and detection risk [DR].

This gives rise to the audit risk model of: AR = IR x CR x DR,

IR, inherent risk, is the perceived level of risk that a material misstatement may occur in the client’s unaudited financial statements, or underlying levels of aggregation, in the absence of internal control procedures.

CR, control risk, is the perceived level of risk that a material misstatement in the client’s unaudited financial statements, or underlying levels of aggregation, will not be detected and corrected by the management’s internal control procedures.

DR, detection risk, is the perceived level of risk that a material misstatement in the client’s unaudited financial statements, or underlying levels of aggregation, will not be detected by the auditor.

The audit plan must incorporate the risk assessment performed before the engagement and identify any areas that require more substantive testing and examination. The results of the assessment of inherent risk, control risk and detection risk will direct the auditor to staff the job with experienced, capable personnel, who are properly supervised, and to set appropriate materiality and sampling levels.

The risk level will determine how work papers are prepared and how much review of field work is performed before an audit opinion is signed. Accounting firms must have policies and procedures that provide guidance for difficult audit plans in order to ensure that quality controls are in place.

GARG, K. (n.d.). scribd. In Audit And Assurance -Basics. Retrieved April 10, 2012, from http://www.scribd.com/doc/52589122/35/Components-of-Audit-Risk Hertog, T. (n.d.).ehow. In The Impact of Audit Risk Model on an Audit Plan.Retrieved April 10, 2012, from http://www.ehow.com/facts_7639318_impact-risk-model-audit-plan.html.

Response 2

The components of the audit risk model are:

–       Relate risk to potential misstatements in the financial statements, either at the financial statement level (risks that have a pervasive effect on the financial statements) or the assertion level (risks that relate to particular assertions).

–       Consider whether risks are of a magnitude that will result in a material misstatement in the financial statements.

–       Consider the likelihood that risks will result in material misstatements.

The audit plan must incorporate the risk assessment performed before the engagement and identify any areas that require more substantive testing and examination. The results of the assessment of inherent risk, control risk and detection risk will direct the auditor to staff the job with experienced, capable personnel, who are properly supervised, and to set appropriate materiality and sampling levels.

Reference:

Boynton, W. C., & Johnson, R. N. (2006).Modern auditing: Assurance services and the integrity of financial reporting. (8th ed.). Hoboken, NJ: Wiley.

 

http://www.ehow.com/facts_7639318_impact-risk-model-audit-plan.html

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Is inventory an asset or a liability? How do we determine if it is an asset or a liability?

Is inventory an asset or a liability? How do we determine if it is an asset or a liability? Might the determination be different for different people in the same organization? Please discuss, providing specific examples.

This would depend on the industry and company financial situation. In most cases to save money people will be careful in ordering material and considering inventory as their burden on their shoulder. This is one of the complicated ares of inventory for any investors, producers, manufacturers, or leaders of any kind. We can swing this both ways. Inventory is definitely an asset because it is the physical goods that you sell, purchase and make your product. Becuase an inventory is something that has value for the company, it is regarded as an asset and not a liability. Assets are things that you have whilst liabilities are things that you owe. However, an inventory can be viewed as a liability especially when these goods are bought on credit and the fact that cost are accrued when you hold inventory

Inventory is both an asset and a liability, and here is my reasoning for this. If you are maintaining the inventroy levels and making the correct turns for the product and consistantly growing your gross margin then you are doing the right thing. The flip side to this is the amount of inventory and what you are holding on to. If the inventory is too much and or not selling it then you are not making the profit off the product. In order to turn a profit it is up to the Operation Mnanager to ensure the levels are where they need to be to make the best bang for the buck. Proper inventory management should limit the amount of products that do not regularly cycle in and out. As we learned in previous classes, using an ABC inventory management method will allow companies to focus on high margin/volume products. Important inventory items, for whatever reason, are considered an A inventory item where non important inventory items are considered C items. Less capital should be invested in C inventory items therefore limiting their potential liability.

Assets include everything company owns that has value. They are listed on a balance sheet each period, along with liabilities and owners’ equity. Current assets typically include cash, marketable securities, accounts receivable and inventory. For a manufacturer, inventory is the value of the raw materials used to make products. Inventory is recorded on company’s balance sheet, and it is considered part of company’s current assets. This means that it has value and is typically sold within 12 months. Inventory can become liability if this is not sold or if it doesn’t move out of inventory. It can also become liability if the inventory is spoiled in the warehouse.

References:

http://yourbusiness.azcentral.com/inventory-asset-liability-1689.html

Inventory can be both an asset and a liability. When inventory is being sold it is considered an asset and when it becomes overstock it becomes a liability with the additional charges that are associated with it such as holding or carrying cost. It can be different for people in the same organization for example, one member in the company may be holding on to a product in case of shortages when the other wants to get rid of it because of the charges that are associated with storage cost.

Inventories need to be managed so that you do not end up with way too much, however we always seem to create more of a systemic problems for the business when we adjust inventories to pad the numbers.   This is a quarterly issue where I work.   A call for a last minute inventory reductions before the finial numbers are posted tells me there is a greater underlying issue.

Inventory management is very important in the retail businesses. Inventory helps in assessing exact status of the production and helps in timely delivery of the products. A manufacturing inventory contains all the data about raw materials, finished goods and production goods. A poorly managed inventory can harm the future of the business resulting in great loss. Good inventory management helps the business to reduce its costs and increase sales. An effective way of achieving this is by having an inventory management system in place, which will track and maintain inventory so that customer demand can be met. They can also be linked to the accounting or management departments, so that all operations can become more effective, reducing costs and maximising profit. Benefits of inventory management are:

  • Reduces cost of inventory obsolescence
  • Organization becomes truly responsive to customers’ real needs
  • Makes scheduling and shop loading more efficient
  • Narrows the gap between sales and stock replacement
  • Fine-tune record-keeping accuracy for better inventory management
  • Reduces Cost
  • Increases sales for the organization

References:

http://www.citeman.com/18575-importance-of-inventory-in-a-manufacturing-unit.html

An important role that inventory plays in the supply chain is to increase the amount of demand that can be satisfied by having product ready and available when the customer wants it. Another significant role inventory plays is to reduce cost by exploiting any economics of scale that may exist during both production and distribution.

 

Inventory is spread throughout the supply chain from raw materials to work in process to finished goods those suppliers, manufacturers, distributors, and retailers hold. Inventory is a major source of cost in a supply chain and it has a huge impact on responsiveness. If we think of the responsiveness spectrum, the location and quantity of inventory can move the supply chain from one end of the spectrum to the other.

Yes, customer demands calls for our inventory level to be in place. Would you make any changes if you have someone as your customer and also happens to be your supplier? Is it possible– your thought!!!

For the firm that I work for, inventory is both an asset and a liability. It is an asset as far as the tools and structures needed to build our machines. It is a liability in the form of too many parts on hand. The current issue with inventory today is that our forecast has changed and demand decreased; causing too much material stored at our plant. This is a liability because this material isn’t moving as quickly as planned.

Inventory is a quantity or store of goods that is held for some purpose or use. Inventory may be kept “in-house,” meaning on the premises or nearby for immediate use; or it may be held in a distant warehouse or distribution center for future use. A manufacturer must have certain purchased items, raw materials, components, or other items needed, in order to manufacture its product. Running out of only one item can prevent a company from completing the production of its finished goods.

While officially classified as an asset, inventory can often feel more like a liability. For example, even though assets such as inventory are defined as “items of economic value,” few business owners are excited about having excess inventory. To grasp this asset-liability , you must understand the difference between inventory, the products or raw materials and the cost of holding it. An asset puts money into your pocket, an asset should generate income on a regular basis. The traditional definition of an asset is anything that you own is worth something-that could be “turned into money” if you needed it to be. Liabilities are the opposite of assets. Liabilities take money out of your pocket. In fact, a lot of things mentioned above- the TV or computer in your room that that might traditionally be considered “assets”-are actually liabilities right now, because it took money out of your pocket just to get them.

Inventory is an asset, because inventory is a stock or store of goods. An asset is a resource controlled by the entity as a result of past events or transactions and from which future economic benefits are expected to flow to the entity. Inventories are a vital part of business. Not only are they necessary for operations, but they also contribute to customer satisfaction.

 

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PROJ 595 Proj Risk Management Week 3 Risk Paper 1

Write a two- to four-page paper regarding a project, either real or fictitious, where one is able to discuss how risks were identified, ranked, and monitored. The student is also welcome to write about a major purchase or major decision in his or her life, such as buying a new car, buying a new home, or even the decision to return to school to earn a degree. All of these are considered projects or procurements that require some form of formal or informal risk review.
 Remember to cite and reference any sources that were used in the project or in the decision-making process. At a minimum, students should connect this assignment back to the text and support their decision-making processes with key concepts from the text. One of the elements of this assignment is to connect the material from the course to actual risk decisions. You are also welcome to use any of the checklists from the text to support the decision-making process.

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PROJ 592 Proj Cost and Schedule Control Week 5 Earned Value Assignment

Problems 5-1 through 5-2
5-1 Earned Value Calculation
Your project has four activities. Below is the current status of each activity.
Activity A was to have cost $150,000 when complete. Its costs so far are $45,000. It is 35% complete. The activity has completed 5 weeks of a planned 15-week schedule.

Activity B is at the end of week 2 of a planned 4-week effort. It is 45% complete. It was to cost $100,000 when finished. Its costs to date are $50,000.

Activity C is finished. It finished 2 weeks late. It cost $100,000. And it was planned to have cost $110,000.

Activity D is beginning its fourth of a planned 6-week schedule. It has cost $200,000 so far. It was estimated to cost $450,000 when finished. It is approximately 55% complete.

Using this data, calculate the following.

1. What are the PV, EV, and AC for each of the activities and the complete project?
2. What are the SV, CV, SPI, and CPI for each of the activities and the complete project?
3. Assess the project performance to date? Do you get to have the celebration?

5-2 Earned Value Calculation

Your project has four activities. Below is the current status of each activity.
Activity A was to have cost $250,000 when complete. Its costs so far are $165,000. It is 50% complete. The activity has completed 7 weeks of a planned 15-week schedule.

Activity B is at the end of week 2 of a planned 4-week effort. It is 65% complete. It was to cost $190,000 when finished. Its costs to date are $150,000.

Activity C is finished. It finished 2 weeks late. It cost $200,000. And it was planned to have cost $250,000.

Activity D is at the end of its fourth of a planned 6-week schedule. It has cost $350,000 so far. It was estimated to cost $500,000 when finished. It is approximately 55% complete.

Using this data, calculate the following.

1. What are the PV, EV, and AC for each of the activities and the complete project?
2. Calculate the CV, SV, CPI, and SPI for each activity and the total project.
3. What is your assessment of the project at this time?

 

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