REPATRIATION

Unit 3 Individual Project - Repatriation

Unit 3 Individual Project - Repatriation

Repatriation Based on Exchange Rates

Foreign exchange has a significant impact on the Navigation Systems Inc. ROS repatriation to US. US currency shows great variation to German Euro and Chinese Yuan in spot rate and 12 month forward exchange rate. Navigation Systems Inc. has to repatriate €12million from Germany and 52million Yuan from China in coming twelve months. Spot rate and forward exchange rate to US differs in value. Analysis given below shows the difference in the repatriation amount based on the Spot rate and 12 month forward exchange rate. Based on the Spot rate repatriation, company will transfer US $17.04million from Germany and US $8.032million from China.

However, if company opts for repatriation based on forward exchange rate, amount transfer would be US $14.808million from Germany and US $7.71million from China. Therefore, change in the repatriation amount would total US $2.552 million. This analysis incorporates the impact of inflation and change in the interest rate in determining the forward exchange rate of 12-monthUS dollar. If company uses repatriation based on 12-month forward exchange rate, it will incur a loss of 2.552 million dollar.

Repatriation of ROS

Currency

ROS Rate

Revenues

ROS

Spot Exchange Rate

ROS in US $

in US $

(Spot Rate Based)

Germany Euro

12%

100,000,000

12,000,000

1.42

17,040,000

Chinese Yuan

8%

650,000,000

52,000,000

0.15

8,032,232

US Dollar

10%

300,000,000

30,000,000

1.00

30,000,000

Repatriation of ROS

Currency

ROS Rate

Revenues

ROS

Forward Exchange Rate

ROS in US $

in US $

Germany Euro

12%

100,000,000

12,000,000

1.234

14,808,000

Chinese Yuan

8%

650,000,000

52,000,000

0.1483

7,711,600

US Dollar

10%

300,000,000

30,000,000

1.0000

30,000,000

Repatriation of ROS

Currency

ROS in US $

ROS in US $

Difference

 

(Spot Rate Based)

(Forward Exchange)

 

Germany Euro

17,040,000 14,808,000 (2,232,000)

Chinese Yuan

8,032,232 7,711,600 (320,632)

US Dollar

30,000,000 30,000,000 -

Total Difference

 

 

(2,552,632)

Repatriation

Repatriation of funds and profits to the foreign country differs greatly based on the option selected to transfer funds. Currently, there are three methods that have been discussed in this paper for the repatriation of funds.

Spot Transaction

Repatriation of funds based on spot transaction refers to foreign exchange transaction in which funds are ...