question archive Dell is selling 30,000 units in Europe at an average price of €1,500 per unit
Dell is selling 30,000 units in Europe at an average price of €1,500 per unit
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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. 1. What is the delta for Dell’s dollar profit assuming zero passthrough?
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