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What Is The Cost Of Financial Exchange?

2011/1/17 10:56:00 49

Financial Exchange Cost

What is the cost of financial exchange?


Financial exchange cost refers to the need to exchange foreign exchange earnings of US $1.

Investment

The amount of RMB.

It is equal to the project.

production

The ratio of the present value of domestic resources invested by export products to the present value of foreign exchange net income of export products.

This index is only applicable to products exported to foreign exchange for analysis and evaluation of the cost of foreign exchange products for the proposed project.


Calculation of financial exchange cost


The calculation formula of financial exchange cost is:


  


 

 


In the form, FCE represents the cost of foreign exchange swap; DRt indicates that the project is invested in the production of export products in t.

domestic

The value of resources (including wages, raw materials and investment, etc.); (FI -FO) t is the net foreign exchange earnings of export products for the year t; IC is the benchmark yield of the industry; the upper right side of the equation is represented by RMB, and the bottom of the equation is expressed in US dollars.


After calculating the financial exchange cost of a project, it should be compared with the official exchange rate. If the former is less than or equal to the latter, the project is feasible; otherwise, the project is not feasible.

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