If the Argentine peso was devalued by 15%, how would it affect your contribution in the home currency, or U.S. dollars? How much more sales revenue would be needed in Argentina to maintain your current contribution?
Homework Answers
Q.1 : If the Argentine peso was devalued by 15%, how would it affect your contribution in the home currency, or U.S. dollars?
Ans-1 : The contribution in home currency would get reduced by USD 2.103395.
Q.2 How much more sales revenue would be needed in Argentina to maintain your current contribution?
ARS 49.5 sales revenue would be needed in Argentina to maintain current contribution of USD 16.12603
Working Notes :
| Contribution after Marketing in ARS (a) | 69.3 |
| Exchange rate per USD to ARS (b) | 4.2974 |
| Contribution after Marketing in USD (c=a/b ) | 16.12603 |
| Exchange rate per USD to ARS (d) | 4.2974 |
| 15% devaluation in ARS (e) | 0.64461 |
| Revised Exchange rate per USD to ARS (f=d+e) | 4.94201 |
| Contribution after Marketing in USD with devalued ARS (g=a/f)) | 14.02263 |
| Reduction in contribution in USD (h=c-g) | 2.103395 |
| Contribution required to compensate devaluatio (i=h*f) | 10.395 |
| Revenue required to generate additional contribution (i/21%) | 49.5 |
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