Case study Blades, Inc is the producer of “Speedos” and the company’s main export of Speedos is to Thailand. Blades’ pri

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Case study
Blades, Inc is the producer of “Speedos” and the company’s main
export of Speedos is to Thailand. Blades’ primary customer in
Thailand, a retailer called Entertainment Products, has committed
itself to purchase a fixed number of Speedos annually for the next
three (3) years at a fixed price denominated in THB. Also, Blades
is using a Thai supplier for some of the components needed to
manufacture Speedos.
However, as a result of the recent weak economy in Thailand, Ben
Holt is worried that the worsening economy of Thailand could affect
the value of the THB and consequently the export of Speedos to
Thailand, even though its primary Thai customer is committed to
Blades over the next three (3) years. The CFO, Ben Holt, has asked
you, the Blades’ financial analyst, to provide him with detailed
illustrations of how he can anticipate Blade’s profit under the
following two potential possibilities:
1. Assuming THB might depreciate from $0.022 to $0.020
within the next 30 days.
2. Assuming THB might appreciate from $0.022 to $0.025
within the next 30 days.
3. Show the speculative profit (in dollars) resulting
from each scenario. Use both possibilities to illustrate
speculation outcomes. Assume that Blades can borrow either $10
million or the baht equivalent of this amount. Furthermore, assume
that the following short-term interest rates (annualized) are
available to Blades in Table 1:
Table 1
Lending & Borrowing Rates of THB and USD