Assuming that MNC entered into a forward contract to sell

Assuming that MNC entered into a forward contract to sell 10 million South Korean won on
December 1, 2013, as a fair value hedge of a foreign currency receivable, what is the net
impact on its net income in 2013 resulting from a fluctuation in the value of the won?a. No
impact on net income.b. $58.80 decrease in net income.c. $2,000 decrease in net income.d.
$1,941.20 increase in net income.MNC Corp. (a U.S.-based company) sold parts to a South
Korean customer on December 1, 2013, with payment of 10 million South Korean won to be
received on March 31, 2014. The following exchange rates
apply:_____________________________________________Forward RateDate
____________________ Spot Rate ______(to March 31, 2014)December 1, 2013 .................
$0.0035 ............... $0.0034December 31, 2013................. 0.0033 ..................0.0032March 31,
2014 ..................... 0.0038 .....................N/AMNC's incremental borrowing rate is 12 percent.
The present value factor for three months at an annual interest rate of 12 percent (1 percent per
month) is 0.9706.View Solution: Assuming that MNC entered into a forward contract to sell
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