Jaguar has full manufacturing costs of their S-type sedan of £22,803. They sell the S-type in the UK with a 20% margin for a price of £27,363. Today these cars are available in the U.S. for $55,000 which is the UK price multiplied by the current exchange rate of $2.01/£. Jaguar has committed to keeping the U.S. price at $55,000 for the next six months. If the UK pound appreciates against the USD to an exchange rate of $2.15/£, and Jaguar has not hedged against currency changes, what is the amount the company will receive in pounds at the new exchange rate?

Question

Quizplus · Accepted Answer

At the current exchange rate of $2.01/£, the S-type is sold for £27,363, so if the exchange rate changes to $2.15/£, the pound will have appreciated against the US dollar.

To find out how much Jaguar will receive in pounds at the new exchange rate, we need to divide the US price of $55,000 by the new exchange rate of $2.15/£:

$55,000 ÷ $2.15/£ = £25,581

Therefore, the answer is B: £25,581.

Jaguar Has Full Manufacturing Costs of Their S-Type Sedan of £22,803