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Homework 4

# Homework 4 - 1 A pro of the international sales plan is...

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1) A pro of the international sales plan is there can be arbitrage opportunities that can be exploited since currency rates change. This leads to another possible advantage which is that is the dollar strengthens the company would have increased income. A disadvantage of this plan is that is the dollar weakens, the company’s real income will decrease. Also, countries in Europe have different laws which can complicate doing business for Steve Madden. 2) As mentioned before, if the dollar strengthens, the company’s profits increase. This occurs because the company will charge a higher price to accommodate the strengthening of the dollar and this will lead to increased revenues. 3) Profits At the rate of \$1.45 /€: i. Sales: 1.45 * 8 million = \$11,600,000 ii. Commission: \$11,600,000 * .05 = \$580,000 iii. Production Cost: \$11,600,000 * .80 = \$9,280,000 iv. Projected gain/loss= \$11,600,000 - \$580,000 - \$9,280,000 = \$1,740,000 At the rate of \$1.30/€ i. Sales: 1.30 * 8 million = \$10,400,000 ii. Commission: \$10,400,000 * .05= \$520,000 iii. Production Cost: \$10,400,000 * .80 = \$8,320,000 iv.

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Homework 4 - 1 A pro of the international sales plan is...

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