What exchange rate will the company break even

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Reference no: EM13951741

The Eagle sells for $98,000 and has a variable cost of $81,000 per airplane. Amalie Diefenbaker, the dealer, wants to add the Eagle to her current retail line. Amalie has told Mark and Todd that she feels she will be able to sell 15 airplanes per month in Europe. All sales will be made in Euros, and Amalie will pay the company 75,384 Euros for each plane. Amalie proposes that she order 15 aircraft today for the first month's sales. She will pay for all 15 aircraft in 90 days. This order and payment schedule will continue each month. In their discussion with Amalie, they found out that the current exchange rate is $1.30/euro. This means that they can convert the 75,384 Euros prier airplane paid by Amalie to $98,000. Thus, this profit on the international sales is the same as the profit on dollar-denominated sales. answer the following questions. *Provide computations on all answers where needed 1. What are the pros and cons of the international sales? What additional risks will the company face? 2. What happens to the company's profits if the dollar strengthens? What if the dollar weakens? 3. Ignoring taxes, what are S&S Air's projected gains or losses from this proposed arrangement at the current exchange rate of $1.30/euro? What happens to profits if the exchange rate changes to $1.37/euro? At what exchange rate will the company break even?

Reference no: EM13951741

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