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Stastistics - Assignment Example

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USA SUPER CAR Company Case Study Executive Summary This business report is aimed to help US Super Car company, involved in the sale of sports cars in multiple countries around the globe, reach a financial decision regarding protecting itself against the exchange rate risk due to its cross border transactions…
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Stastistics
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Download file to see previous pages In order to calculate the risk, uncertainty estimates are provided by HSBC bank. The ‘Mean’ of uncertain returns for US Super Cars are equal to $2,092,868 and the fixed amount offered by HSBC is $2,150,000. If the uncertain revenues and the amount offered by HSBC are compared, the offer appears to be a very beneficial for US Supper Cars as the uncertain revenues are less than the money offered by HSBC and also by accepting this offer the exchange rate risk will be transferred from USA Super Cars to HSBC. In addition US Super Cars will not have to pay any additional charges (contractual fee etc.) to enter into the contract. Introduction The today’s business environment is highly globalized and is truly lacking borders. The businesses have moved beyond domestic and national boundaries to include markets around the globe which has resulted in the increased interconnectedness of distant localities. The goods produced in one area of the world are consumed in a separate distant locality. The companies are outsourcing their productions to areas where labor or material costs are lower in the effort to earn higher profits. When local competition intensifies the organizations start catering to markets in other countries where competition is less and market is relatively immature. In such cross border transactions, organizations are exposed to exchange rate risk which they will not face if they are involved in merely domestic transactions. Moving beyond the boundaries has several positive as well as various negative aspects. On the positive side, the market is expanding day by day and the number of customers is increasing with the same proportion, therefore, the business sales increase rapidly. Keeping in view the fact, the US Super Car company has taken a step to sell their luxury sport cars in five (5) countries including the United Kingdom, Japan, Canada, South Africa and United State of America. While doing business across the world, there is always a risk of fluctuation in the exchange rate that may result in an increase or decrease in the profit margin. There are certain calculations include but not limited to the standard deviations, mean, average, sum, and the profit which needs to be performed in order to cope with exchange rate uncertainty. Mean & Standard Deviation Initially, it is vital to calculate the mean, standard deviation and variance on the selling price of the customer. In order to perform the calculations, it is equivalently important to convert / exchange the money currencies into dollars (as we need to answer in dollars) (AGAInstitute, n.d). The following table shows the details of the calculated values of the mean, standard deviation and variance. In order to calculate the uncertain revenues in dollars, the dollar per local currency rate provided by HSBC bank is multiplied by the selling price and the quantity for example in order to calculate uncertain revenues generated by sales in UK, $1.41/? mean provided by HSBC is multiplied by the selling price in the UK which is equal to ?57,000 and the quantity sold (12). The product obtained is the uncertain revenue generated through sales in the UK. The same process is repeated to get uncertain revenues in each individual foreign country (Japan 1, Japan 2, Canada 1, Canada 2, and South Africa). The total ...Download file to see next pagesRead More
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