6 Could Blades modify its payment practices for the Thai imports in order to reduce its transaction...

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6 Could Blades modify its payment practices for the Thai imports in order to reduce its transaction exposure?

What is the tradeoff of such a modification?

Blades plc has recently decided to expand its international trade relationship by exporting to the United States. Jogs Inc a US retailer, has committed itself to the annual purchase of 200 000 pairs of ‘Speedos’, Blades’ primary product, for a price of $80 per pair.
The agreement is to last for two years, at which time it may be renewed by Blades and Jogs.
In addition to this new international trade relationship, Blades continues to export to Thailand. Its primary customer there, a retailer called Entertainment Products, is committed to the purchase of 180 000 pairs of Speedos annually for another two years at a fixed price of 4594 Thai baht per pair. When the agreement terminates, it may be renewed by Blades and Entertainment Products.
Blades also incurs costs of goods sold denominated in Thai baht. It imports materials sufficient to manufacture 72 000 pairs of Speedos annually from Thailand. These imports are denominated in baht, and the price depends on current market prices for the rubber and plastic components imported.

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Exploring Economics

ISBN: 9780324395464

4th Edition

Authors: Robert L. Sexton

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