Markel Corporation is a Pennsylvania-based SME that makes wire and tubing for the automotive and fluid-handling industries. The firm exports to Germany, Spain, Japan, and numerous other countries, generating much of its annual sales from abroad. Suppose Markel sells merchandise to its Spanish importer for €20,000, payable in 60 days. Further suppose that the US dollars strengthens its value against Euro with the exchange rate changing from $1= €1.05 to $1= €1.15 during the 60-day period. Based on the information provided, calculate and answer the following three questions. a) How would the exchange rate fluctuation impact the sales revenue of Markel measured in US dollars? b) How much sales revenue in US dollars would Markel gain or loss as a result? c) What suggestions do you have to help Markel avoid its potential losses resulting from such currency risks?
Markel Corporation is a Pennsylvania-based SME that makes wire and tubing for the automotive and fluid-handling industries. The firm exports to Germany, Spain, Japan, and numerous other countries, generating much of its annual sales from abroad. Suppose Markel sells merchandise to its Spanish importer for €20,000, payable in 60 days. Further suppose that the US dollars strengthens its value against Euro with the exchange rate changing from $1= €1.05 to $1= €1.15 during the 60-day period. Based on the information provided, calculate and answer the following three questions. a) How would the exchange rate fluctuation impact the sales revenue of Markel measured in US dollars? b) How much sales revenue in US dollars would Markel gain or loss as a result? c) What suggestions do you have to help Markel avoid its potential losses resulting from such currency risks?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
