Dell is selling 30000 units in europe at an average price, Ask an Expert

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Dell is selling 30,000 units in Europe at an average price of €1,500 per unit. Both the spot and forward exchange rates are $1.20/€. The cost of each unit in dollars is $1,300 per unit. The elasticity of demand for Dell computers in Europe is ε = 1.5.

Now consider a depreciation of Euro (relative to US dollar) from $1.20/€ to $1.08/€ and assume zero passthrough. What is Dell’s dollar profit exposure?

$45 million

€45 million

$20 million

€20 million

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92415289

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