What is dells dollar profit exposure

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Reference no: EM132068246

Dell is selling 20,000 units in Europe at an average price of €1,700 per unit. Both the spot and forward exchange rates are $1.20/€. The cost of each unit in dollars is $1,500 per unit. The elasticity of demand for Dell computers in Europe is e = 1.5.

Now consider a depreciation of Euro (relative to US dollar) from $1.2/€ to $1.08/€ and assume zeo passthrough. What is Dell's dollar profit exposure and how to hedge it using forward?

Reference no: EM132068246

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