What impact would devaluation of the us dollar

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Reference no: EM132192048

Situation A small Canadian company has contracted to purchase 100,000 toys for £ 3.50 each from a British toy manufacturer. The Canadians have agreed to pay in pounds sterling. The Canadians have also agreed to sell the toys to a US company for $5.50 US per toy. The Canadian company has agreed to accept US dollars but plans to convert these revenues to Canadian dollars. The Canadian company estimates its marginal costs for warehousing, distribution, etc. is C$.75 per toy.

1. a) What impact would a devaluation of the US dollar relative to the Canadian dollar have on the Canadian company's profits? b) What impact would a revaluation upward have?

2. a) What impact would a devaluation of the British pound relative to the Canadian dollar have on the Canadian company's profits? b) What impact would a revaluation upward have?

Reference no: EM132192048

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