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 34.62 euros per 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 $1.30 /euro,what is the gross profit on the wine? (Round to the nearest dollar. )

Question

Quizplus · Accepted Answer

The cost in dollars is 10,000 cases * 34.62 euros/case * $1.30/euro = $450,060. The revenue is 10,000 cases * $63/case = $630,000. The gross profit is $630,000 - $450,060 = $179,940.

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