1. Consider again the case of the French subsidiary of Textron Inc. On October 1, 1969, the Deutsche mark is revalued from FF1.70 to FF1.80 to DMI.

Assess the impact of the DM revaluation on the profitability of Textron S.A.

during the remaining nine months of the fiscal year 1969-1970, assuming that the DM revaluation induces a decrease of 2 % in the German national income and that the German demand for agricultural machinery (including chainsaws) is characterized by an income elasticity of 1.1.