The management accountants in WER plc are estimating the potential effect of changes in the exchange rate (below).

Currently WER imports mostly from the EU with sales both in the EU and the UK. WER is thinking of borrowing either in UK pounds or in euros at about the same rate (i.e. euro interest cost: £150 × 1.3 = €650). Create an Excel worksheet that calculates the effect of financing in euros and a fall in the GBPEUR to 1.1. Explain your result.

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000s GBPEUR 1.3 Total Sales 2,000 3,000 4,538.46 Costs 3,000 1,000 3,307.69 Interest 500 500.00 Profit 730.77