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What is norse fx operating exposure

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Norse Inc. a U.S. based exporter that exclusively sells its products in Great Britain. Norse, expects to sell 2,000 units at a price of GBP 10.00 per unit. Norse currently produces in Highland Heights, KY and has a variable production cost of USD 8.10 per unit, and total fixed costs of USD 5,000. Norse puts in place an FX pass through policy of 50%. Assuming that Norse Inc. can change its price without affecting quantity demanded in the British market. What is Norse's FX operating exposure with the FX pass through policy? (Hint: Set up the base case at XUSD/GBP = 1.50 and then recalculate the operating cash flow based using the new sales price at XUSD/GBP = 1.35).

Reference no: EM132675663

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