NAME __________________________________________ FIN 426 EXAM 2 Please read instructions carefully: Assignment below refers to “your country” which stands for the country you have presented on. Please specify “your country” here _________________________ Assignment below refers to “main currency” which is either US Dollar or Euro. If “your country” has a fixed exchange rate tied to USD, use Euro as “main currency”. Otherwise, use USD. Please specify “main currency” here ______________________ Go to Yahoo! Finance and find information on exchange rate of main currency/your country currency. Take a screenshot of Summary tab. Fig. 1. Summary for “Main Currency/Your Country’s Currency” What is the bid-ask spread according to the above screenshot? What is the bid-ask spread for the reciprocal quote (“Your country’s currency/Main Currency”)? You have to show how you converted the values from the Summary tab to get the reciprocal quote. Open daily exchange data in Historical Data tab, and fill out the following table. Table 1. Historical exchange rates for Main Currency/Your Country’s Currency Date Main Currency/Your Country’s Currency 4/8/2020 4/8/2019 4/9/2018 4/7/2017 4/8/2016 Given the values in Table 1, calculate indirect exchange rate (Your Country’s Currency/Main Currency) for each date. You have to show your calculations. Explain how each of the following conditions would be expected to affect Your Country’s Currency/Main Currency exchange rate. Be specific. a) Your country’s central bank substantially lowers interest rates. b) A deficit in your country’s Balance of Payment’s current account due to the import/export imbalance. c) An increase in the US government debt. Table 2. Historic exchange rates for Russian Ruble/Main Currency Date Russian Ruble/Main Currency 4/8/2020 0.0136 4/8/2019 0.0153 4/9/2018 0.0172 4/7/2017 0.0177 4/8/2016 0.0147 Using information in Table 1 and in Table 2, find cross-exchange rate between Russian Ruble and Your Country’s currency for each date. You have to show your calculations. Using daily historical data on exchange rate between Main Currency/Your Country’s Currency, fill out the blanks to calculate average volatility of your country’s currency. Date High Low Difference 4/8/2020 4/8/2019 4/9/2018 4/7/2017 4/8/2016 Avg. Volatility Download annual interest rate (CPI) data from the World Bank (https://data.worldbank.org/indicator/fp.cpi.totl.zg) and supplement Table 1 with interest rates for your country and the main currency country Date Main Currency/Your Country’s Currency i your country i main currency country 4/8/2020 4/8/2019 4/9/2018 4/7/2017 4/8/2016 How well does relative PPP hold in this example? Explain. Background setting We’ve been working with a company, Marandi, who provides the essential of our product--- 3-inch tude ...

1. NAME __________________________________________
FIN 426 EXAM 2
Please read instructions carefully:
Assignment below refers to “your country” which stands for the
country you have presented on.
Please specify “your country” here
_________________________
Assignment below refers to “main currency” which is either US
Dollar or Euro. If “your country” has a fixed exchange rate tied
to USD, use Euro as “main currency”. Otherwise, use USD.
Please specify “main currency” here ______________________
Go to Yahoo! Finance and find information on exchange rate of
main currency/your country currency. Take a screenshot of
Summary tab.
Fig. 1. Summary for “Main Currency/Your Country’s Currency”
What is the bid-ask spread according to the above screenshot?
What is the bid-ask spread for the reciprocal quote (“Your
country’s currency/Main Currency”)? You have to show how
you converted the values from the Summary tab to get the
reciprocal quote.

2. Open daily exchange data in Historical Data tab, and fill out the
following table.
Table 1. Historical exchange rates for Main Currency/Your
Country’s Currency
Date
Main Currency/Your Country’s Currency
4/8/2020
4/8/2019
4/9/2018
4/7/2017
4/8/2016
Given the values in Table 1, calculate indirect exchange rate
(Your Country’s Currency/Main Currency) for each date. You
have to show your calculations.
Explain how each of the following conditions would be
expected to affect Your Country’s Currency/Main Currency

3. exchange rate. Be specific.
a) Your country’s central bank substantially lowers interest
rates.
b) A deficit in your country’s Balance of Payment’s current
account due to the import/export imbalance.
c) An increase in the US government debt.
Table 2. Historic exchange rates for Russian Ruble/Main
Currency
Date
Russian Ruble/Main Currency
4/8/2020
0.0136
4/8/2019
0.0153
4/9/2018
0.0172
4/7/2017
0.0177
4/8/2016
0.0147
Using information in Table 1 and in Table 2, find cross-

4. exchange rate between Russian Ruble and Your Country’s
currency for each date. You have to show your calculations.
Using daily historical data on exchange rate between Main
Currency/Your Country’s Currency, fill out the blanks to
calculate average volatility of your country’s currency.
Date
High
Low
Difference
4/8/2020
4/8/2019
4/9/2018
4/7/2017
4/8/2016

5. Avg. Volatility
Download annual interest rate (CPI) data from the World Bank
(https://data.worldbank.org/indicator/fp.cpi.totl.zg) and
supplement Table 1 with interest rates for your country and the
main currency country
Date
Main Currency/Your Country’s Currency
i your country
i main currency country
4/8/2020
4/8/2019
4/9/2018
4/7/2017

6. 4/8/2016
How well does relative PPP hold in this example? Explain.
Background setting
We’ve been working with a company, Marandi, who provides
the essential of our product--- 3-inch tude as well as other parts
of the product for 15 years.
The quality of service of Marandi is perfect and we have great
relationships.
The company is trying to reduce cost to improve the company’s
competitive position and the financial situation.
We found one company---Vergis has lower offer price for the
essential part and can save up $24,000 for the company.
But Vergis has no history to work with our company before.
And the quality and delivery of 3-inch tube is important for our
company.
The record shows Vergis had a good reputation and there were
no problems uncovered.

7. Problem identification
Analysis and Evaluation
Pros and Cons

8. Action plans
Thank you!
Case 10–1
Wedlock Engineered Products
Cynthia Gao, procurement manager for Wedlock Engi- neered
Products in Buffalo, New York, was reviewing a proposal
recommending that the company change sup- pliers for a critical
raw material. It was June the 3rd, and Cynthia needed to decide
before the end of the day how she would respond to the
proposal.
WEDLOCK ENGINEERED PRODUCTS
Wedlock Engineered Products (Wedlock) manufactured and
distributed hydraulic, power-assisted, air-powered, and standard
mechanical dock levelers, and dock seals and shelters, and
vehicle restraints. Wedlock had profits of $50 million on sales
of $450 million in the most recent fiscal year ending December
31. The company had en- joyed double-digit growth over the

9. previous decade, sup- ported mainly through an aggressive
acquisition strategy.
Wedlock’s growth masked cost pressures the company was
facing in its key markets. The company’s annual re- port
indicated that financial results were lower than ex- pected due
to price erosion. In February, the CEO, Dmitry Barsukov,
announced a corporate cost-reduction initiative aimed at
improving the company’s competitive position. As part of the
announcement, Barsukov specifically men- tioned
“opportunities for supply chain savings through coordination of
purchasing between operating units and divisions.”
The Buffalo plant manufactured hydraulic dock lev- elers that
were installed in shipping and receiving areas in manufacturing
facilities, distribution centers, retail operations, and other
facilities required to accommodate loading and unloading of
highway transport trailers. It produced a standard product that
was sold in the replace- ment and new construction markets
under the Sloan Lev- eler brand. The Wedlock plant in
Cleveland, Ohio, also manufactured hydraulic levelers, under
the brand name Cole Dock Levelers. The Cole line of levelers
targeted the customized market, for customers with unique
material handling requirements.
PURCHASING AT THE BUFFALO PLANT
Cynthia Gao, along with Garett MacDonald, buyer, and Adam
McEniry, materials planner, comprised the pro- curement group
at the Wedlock plant in Buffalo. Total purchases were $23
million.
Cynthia worked closely with Robert Scobie, her coun- terpart at
the Cleveland plant, to coordinate purchases and identify
opportunities for costs savings. The Cleveland plant was similar
in size to the Buffalo plant, with ap- proximately $25 million in
annual purchases. Cynthia and Robert had committed to savings
of $1.5 million in the current fiscal year as part of the corporate
cost-reduction initiative. They had documented approximately
$500,000 so far, measured by year-over-year price reductions
from suppliers and based on forecasted annual usage.

10. STEEL TUBING
The Buffalo and Cleveland plants purchased 3-inch steel tube
with a combined total value of $1.1 million annu- ally. The
tubing was used on the loading dock platform
to support the hinge connected to the lip of the platform that
allowed it to lay flat or unfold, in order to connect or
disconnect from the transport trailer. The tubing was required to
meet specific metallurgical standards or else the tubing would
warp or crack, causing the loading dock to malfunction.
The current supplier for 3-inch tubing was Marandi Steel
(Marandi). Located near Buffalo, Marandi distribut- ed a wide
range of carbon, stainless, alloy, and aluminum tubing; pipe
products in round, square, and rectangular shapes; and steel
plate to manufacturing companies in the eastern United States
and Canada. Marandi had been a supplier to the Wedlock
Buffalo plant for approximately 15 years and provided excellent
service. Cynthia had a strong working relationship with the
general manager at Marandi and could recount several occasions
when they reacted quickly to material shortages at the Buffalo
plant that helped keep production going. Marandi currently sup-
plied several products, including tubular steel, shapes, and
plate, to both the Wedlock Buffalo and Cleveland plants. The
supply arrangement with Marandi to the Buffalo plant included
just-in-time delivery arrangements, which helped to keep
inventory levels at a minimum. Total annual purchases from the
supplier were approximately $3 million for the Buffalo plant
and $2.5 million for the Cleveland plant.
In order to test the pricing for 3-inch tubing, Robert Scobie
issued a request for quotations (RFQ) the previ- ous month from
several steel tubing distributors, includ- ing Marandi. The RFQ
indicated the expected term of the contract would be two years
and include 100 percent of the requirements for both the
Buffalo and Cleveland plants. The two lowest quotes were from
Vergis Tubing (Vergis), located in Erie Pennsylvania, and
Marandi. The quote submitted by Vergis represented an annual
cost sav- ings of approximately $24,000 compared to the incum-

11. bent supplier.
REVIEWING OPTIONS
Robert felt that Vergis should be awarded the contract to supply
3-inch tubing for the Buffalo and Cleveland plants and was
urging Cynthia to accept the proposal. However, Cynthia had
concerns. Vergis had attempted unsuccess- fully on several
other occasions to secure business from Wedlock, and she was
worried that Vergis did not have any history with either the
Buffalo or Cleveland plants. Delivery and quality performance
for 3-inch tube was critical for the Buffalo plant, and the
performance of Marandi in these areas had been outstanding. A
check of Vergis’s references found that they had a good
reputation and there were no problems uncovered.
Cynthia was also concerned about the effect of aban- doning a
long-standing relationship, which might have other cost
implications and jeopardize service provided by Marandi.
Marandi supplied a number of other products to the Buffalo
plant, and Cynthia wondered how awarding
Case 10-1: Wedlock Engineered ProductsIMMEDIATE ISSUE
Decide whether to change the supplier for 3-inch tubes.
BASIC ISSUES
· Supplier selection
· Supply costs savings
· Bid evaluation
· Single sourcing
· ABC analysis
SUGGESTED STUDENT ASSIGNMENT
As Cynthia Gao, what recommendation would you make to
Robert Scobie regarding supply for the 3-inch tubes?
POSSIBLE DISCUSSION QUESTIONS

12. 1. How much weight should be placed on previous supplier
performance when selecting a supplier?
2. Is $24,000 in savings worth the trouble of switching
suppliers?
3. What will the response be from Vergis if you stay with
Marandi, after they provided a lower bid?
4. Do you want to split the business between the two suppliers?
5. If you switch to Vergis for the 3-inch tubes, how will that
affect your relationship with Marandi for the rest of your
business with them?
6. Is using an RFQ the right approach in this situation?