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Detmer Holdings AG of Zurich, Switzerland, has just introduced a new fashion watch for which the company is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each SFr2 per unit reduction in the selling price. (SFr2 denotes 2 Swiss francs.) The company’s present selling price is SFr90 per unit, and variable expenses are SFr60 per unit. Fixed expenses are SFr840,000 per year. The present annual sales volume (at the SFr90 selling price) is 25,000 units.
Required: 1. What is the present yearly net operating income or loss?
Suppose the interest rate on a 1-year bond is 4% and that on a 2 year T-bond is 4.5%. Assuming the pure expectation theory is correct, what is the market's forecast for 1-year forward rate one year from now?
Currently, you can exchange $100 for €75.42. The inflation rate in Euroland is expected to be 3.8 percent as compared to 2.1 percent in the U.S. Assuming that relative purchasing power parity exists, what should the exchange rate be 2 years from now?
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If the cash flows were to be remitted to the UK parent, explain how the Asian crisis would have affected the expected cash flows of this project.
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