-Pfizel ANSWER 1 2 AND 3! A small Canadian company has contracted to purchase 20

Question

-Pfizel ANSWER 1 2 AND 3! A small Canadian company has contracted to purchase 200,000 toys for 3.50 British pounds each, from a British company. The Canadians have agreed to pay for the toys in British pound sterling. The Canadians have also agreed to sell the toys to a U.S. company for USDS 5.50 per toy. The Canadian company has agreed to accept U.S. dollars but plans to convert these revenues to Canadian dollars The Canadian company estimates its marginal (additional cost per unit) costs (for warehousing, insurance, transportation, and so on) as an additional CADS.75 per toy rat a fee a rgiving fav e passesf Exchange rates at the time of signing the agreements are as follows: CADS 1 USDS.95 CADS1- British pound .57 remedy ag as a consu g capital r On the line below indicate whether the firm eamed a profit or loss from this deal and what was the CAD dollar amount of the profit or loss in total. (Clearly state if a profit or loss was earned, what it was and show profit or loss calculation clearly with labels in space below) 1. Place.word profit or loss.on line omatedi annot p re finan ed mailb on and t r to mak o the exp Show work clearly below 2. a) What impact would a depreciation of the British pound relative to the U.s. dollar have on the Canadian company's profit/loss? (Cincrsase profit, decrease profit, increase loss, decrease loss, or no change on line below) Ans. Why? s. Ir exchange rases hanged to the exchange rate showa below, stateishow the amount of the Canadian company's total profit or loss on the deal now? (Show profit or loss calculation clearly) CAD$1 " USD.64 CADS 1 British pound 40

Explanation / Answer

amount paid in British pound=200000*3.5 british pound

= 700000

1 british pound= 1/0.57 CAD$

700000 British pound= 1228070.1754CAD$

warehousing, transportation etc costs= 0.75*200000 CAD$

= 150000CAD$

amount receieved from selling toys to U.S. company= 5.5*200000USD

= 1100000USD

1 USD=1/0.95 CAD$

1100000USD= 1157894.7368 CAD$

So the net profit for Canadian company is 1157894.7368-150000-700000

= 30894.38CAD$

Profit

30894.38CAD$

2) depreciation of the British pound relative to U.S dollar will decrease profit as the value to be paid to British company will be high now.

3)amount paid in British pound=200000*3.5 british pound

= 700000

1 british pound= 1/0.40CAD$

700000 British pound= 1750000CAD$

warehousing, transportation etc costs= 0.75*200000 CAD$

= 150000CAD$

amount receieved from selling toys to U.S. company= 5.5*200000USD

= 1100000USD

1 USD=1/0.64CAD$

1100000USD= 1718750CAD$

So the net profit for Canadian company is 1718750-150000-1750000

= -181250CAD$

loss

-181250CAD$

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