Research methods - Assignment Example

The USASuperCars signed a new contract, which would allow it to sell its batch of 27 luxury cars to various customers around the globe, primarily in the UK, Japan, Canada, South Africa and the USA. The contract states that the selling price of the products are fixed and in local currencies at the exchange rates at the time of the delivery. In the real economic world set up, the exchange rate is marked with high level of precariousness. Therefore, one, particularly a businessman, cannot simply overlook the idea about the linked benefits and risks to the stated contract.

In this event, the HSBC offered to pay a sure sum of $2,150,000 in return for revenue in local currencies. It is at this point that the work at hand seeks to come up with a decision whether to accept or reject the offer by weighing up the associated benefits and risks. In addition, in the event that the HSBC’s offer is accepted, finding for which payment schedule is better based on the point of view of USASuperCars and HSBC, searching for other potential risks HSBC will be exposed to, and finally understanding the measures that can be taken in order to at least minimize the exchange rate risk beyond converting all currencies into dollars.

Profit analysis for USASuperCars is vital for this case, prior to deciding which payment option is necessary provided that the offer of HSBC is accepted. Recommendations are provided, which are associated with HSBC’s offer. The justification behind the profit analysis is based on the information of the worldwide order, the quantity and the selling price of luxury cars in the local currencies. To ensure the information about exchange rate is properly considered, the mean and standard deviation rate for converting each currency into dollars are included based on the historical data.

Based on the assumption that the rates are normally distributed and independent with each other, the profit has the assumption that it is normally distributed as well. As