Dozier Industries has entered into an international sales transaction. As part of this contract‚ Dozier will be installing an internal security system for a manufacturing firm in UK‚ for which Dozier has already received 10% down payment and it is expected to receive another GBP 1‚175‚000.00 in 3 months. Dozier’s costs are in USD‚ however its sales payment will be in GBP. Dozier is facing an exchange rate risk‚ especially since GBP has already depreciated by 2.3% between the time sales bid( in GBP)
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the best one for Dozier. After their bid was accepted‚ Dozier has three options to choose from. Of the three choices‚ the 1st alternative yields the most profit. However‚ the profit from alternative 1 cannot be guaranteed‚ and it is much more volatile. The company wants to expand its market to the U.K. and also guarantee the profit (while minimizing exchange risk). Therefore‚ alternative 2‚ which has a higher profit margin than alternative 3 is the best hedging choice for Dozier. Alternative
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UVA-F-0745 DOZIER INDUSTRIES (A) Richard Rothschild‚ the chief financial officer of Dozier Industries‚ returned to his office after meeting with two officers of Southeastern National Bank. He had requested the meeting to discuss financial issues related to Dozier’s first major international sales contract‚ which had been confirmed the previous day‚ January 13‚ 1986. Initially‚ Rothschild had contacted Robert Leigh‚ a vice president of the bank‚ who had primary responsibilities for Dozier’s
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Dozier Industries Case On January 13‚ 1986 Dozier Industries‚ an American based firm‚ received notice that a bid on a project in the United Kingdom had been accepted. The project was to bring in £1‚175‚000 in revenue. Therefore‚ the revenue received for this project will need to be transferred into US dollars. When Dozier issued the bid on December 3‚ 1985 the project the exchange rate was $1.4820/£. This rate would have provided Dozier with the desired 6% profit on the project. On January
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Dozier Industrias Dozier Industries Case Dozier Industrias caso Dozier Industrias tiene tres opciones para elegir la hora de decidir sobre la mejor manera de manejar su primera cobrar en dólares fuera de Estados Unidos denominada: 1. 1. Entering into a forward contract in which Dozier would sell forward British Pounds. La suscripción de un contrato a plazo en el que Dozier vendería libras británicas hacia adelante. 2. 2. Execute a spot market transaction to create a synthetic forward hedge
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Dozier Hedging Alternatives Forward Market Hedge: Dozier would purchase U.S. dollars under a forward contract. The contract would obligate Dozier to pay £1‚057‚500 in exchange for £1‚057‚500 x 1.4198 $/£ = $1‚501‚438.50 assuming the transaction was at the quoted 3-month forward rate in Exhibit 4. Relative to the value of the contract at the current exchange rate‚ £1‚057‚500 x 1.4370 $/£ = $1‚519‚627.50 Dozier would accepting a reduction in the revenue from the contract of $1‚519
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Dozier Since the acceptance of Dozier Industries’ bid‚ the company CFO has been exploring the methods available to best manage the exchange risk associated with the award payment being dispersed in British Pounds (GBP). He originally considered a forward contract or a spot contract‚ but is now investigating how currency options could help hedge against uncertain foreign exchange exposure. The CFO needs to decide whether or not options contracts might provide some benefit to hedge the currency
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also created a pound obligation 90 days hence. Dozier would borrow pounds and exchange the proceeds into dollars at the spot rate. On April 13‚ Dozier would use its pound receipts to repay the loan. Any gains or losses on the receivable due to a change in the value of the pound would be offset by equivalent losses or gains on the loan payment. John Gunn indicated that there would be no difficulty for Southeastern to arrange the pound loan for Dozier through its correspondent bank in London. He believed
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Caso B: …Alvalade XXI… 70651 – Rute Lemos 1. Análise conceptual / Conceptual analysis The concepts marked by red are concepts from the book. 2. O problema / The problem In terms of organizational problems‚ Casa XXI needed to improve its organizational performance and change its business model by reducing the need for controlling cash registers and bartenders‚ and the use of cash affected the time it took to execute payment transactions. They also wanted to have more sales at peak
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1.The original motivation behind Bayer’s decision to launch the Makrolon ingredient branding concept was‚ to give Bayer and it’s partner’s the ability to achieve a differentiation of themselves from the competition and competing products by means of a branding strategy. It was important to Bayer to highlight the advantages of Makrolon and transfer this positive image to the end product with the help of a brand name. With this differentiation it gives the ingredient a unique selling proposition‚ or
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