Considering the import transaction, what would have been the most likely recommendation made by the finance team to Vihaan Mehta during the meeting?…
CA Final · Integrated Business Solutions (Multidisciplinary Case Study) · MTP · November 2024
Considering the import transaction, what would have been the most likely recommendation made by the finance team to Vihaan Mehta during the meeting? (Assume 360 days in a year)
Suggested Answer and Working Notes:
Possible Options are as under: (i) Pay the supplier in 60 days If the payment is made to supplier in 60 days, the applicable forward rate for 1 USD 84.10 Payment Due USD 20,00,000 Outflow in Rupees (USD 2,000,000 × ₹ 84.10) 16,82,00,000 Add: Interest on loan for 30 days @10% p.a. 14,01,667 Total Outflow in ₹ 16,96,01,667 (ii) Availing supplier’s offer of 90 days credit Amount Payable USD 20,00,000 Add: Interest on credit period for 30 days @8% p.a. USD 13,333 Total Outflow in USD USD 20,13,333 Applicable forward rate for 1 USD 84.50 Total Outflow in ₹ (USD 2,013,333 × ₹ 84.50) 17,01,26,639 Alternative 1 is better as it entails lower cash outflow.
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