Hudson Valley Distributors wants to be sure it has 10,000 cases of Beaujolais Nouveau to sell next November.In January,they enters into an agreement to buy the wine at a price of 30 euros to the case.Payment will be due at the end of November.They expect to sell the wine to restaurants and retailers for $63 per case.If Hudson Valley does not hedge its position and the exchange rate in November is $1.50 /euro,what is the gross profit on the wine?

Question

Quizplus · Accepted Answer

The cost in dollars is 10,000 cases * 30 euros/case * $1.50/euro = $450,000. The revenue is 10,000 cases * $63/case = $630,000. The gross profit is $630,000 - $450,000 = $180,000.

Hudson Valley Distributors Wants to Be Sure It Has 10,000