Firm X a U.S. based exporter that exclusively sells its products in Great Britain. Firm X, expects to sell 15,000 units at a price of GBP 10.00 per unit. Firm X produces in Newport News, VA and has a variable production cost of USD 7.00 per unit, and total fixed costs of USD 60,000. What is Firm X’s FX operating exposure? Please use 1.50 as a base FX rate for your analysis and then lower it to 1.35 as in HW set 3.
Choices:
2.68
5.64
4.22
3.75
| Computation of FX operating exposure | |||
| Amount (GBP) | |||
| Sales | 10 | ||
| Less | Variable Production cost [$7/1.5] | 4.67 | |
| Less | Fixed Cost [($60000/15000)/1.5] | 2.67 | |
| Operating Exposure | 2.67 | ||
Therefore option 2.68 is correct
Firm X a U.S. based exporter that exclusively sells its products in Great Britain. Firm X,...
Inc. a U.S. based exporter that exclusively sells its products in Great Britain.,Inc expects to sell 2,000 units at a price of GBP 10.00 per unit. inc currently produces in KY and has a variable production cost of USD 8.10 per unit, and total fixed costs of USD 5,000. Use an expected XUSD/GBP = 1.50. What is inc’s expected cash flow from operations?