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Business, 24.04.2020 19:33 destinyranson

Lan Pharmaceuticals, a U. S.-based multinational pharmaceutical company, is evaluating an export sale of its cholesterol-reduction drug with a prospective Indonesian distributor. The purchase would be for 1 comma 650 million Indonesian rupiah (Rp), which at the current spot exchange rate of Rp9 comma 410/$, translates into $175 comma 345.38. Although not a big sale by company standards, company policy dictates that sales must be settled for at least a minimum gross margin, in this case, a cash settlement of $168 comma 000. The current 90-day forward rate is Rp9 comma 920/$. Although this rate appeared unattractive, Elan had to contact several major banks before even finding a forward quote on the rupiah. The consensus of currency forecasters at the moment, however, is that the rupiah will continue to strengthen, possibly rising to Rp 10 comma 200 divided by $ over the coming 90 to 120 days. Analyze the prospective sale and make a hedging recommendation.

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