A company based in the Netherlands has entered into a contract to sell digital readers to an oil firm in Nigeria. The contract calls for the delivery of 40 thousand pieces/units. The Nigerian company will pay 28 Euro for each unit. The payment will be made the Netherlands company in Euros.

The Netherlands Company does not manufacture the units but buys them from a firm in China and is thus a re-seller. The Netherlands firm will pay in Chinese Yuan. The payment will be 250 Yuan per unit.

In addition the Netherlands company will have the following additional costs directly related to this contract.

Total transportation costs= 5,000 Euro total

Insurance, customs brokerage, warehousing= .40 Euro per unit.

Exchange rate when contract signed January

1 Euro = 468.83 Nigerian Naira

1 Naira = .0021 Euro

1Euro = 9 Yuan

1 Yuan = .1111 Euro

1. Would the Netherlands firm earn a profit or loss on this contract if the transaction was completed today?

Indicate profit or loss by placing either word here:_______

________________amount of profit or loss from above (use a + for profit and for loss)

Show work here:

2.

What would happen to the Netherlands firms profit or loss from this contract should a depreciation of the Euro occur relative to the Naira. (Select increase profit, increase loss, decrease profit, decrease loss, or no change and place this answer on line below)

_________Ans. Why?

3. What would happen to the Netherland firms profit or loss from this contract should a depreciation of the China Yuan occurred relative to the Euro? (Increase profit, decrease profit, increase loss, decrease loss, or no change on line below)

____________Ans. Why?

4. Would the firm in Nigeria prefer the Naira to appreciate or depreciate in regards to importing good from Euro currency countries? (Answer Naira appreciate or Naira depreciate)

____________Ans. Why?

Assume between the time the contract was signed in January and months later when the transaction was completed, that the exchange rates changed to the following: (assume all receipts and payments occurred the same day month after the January contract was signed)

1 Euro = 500 Nigerian Naira

1 Naira = .002 Euro

1Euro = 7.33 Yuan

1 Yuan = .1364 Euro

5. What is the end financial result for the Netherlands firm regarding this transactions?

Indicate profit or loss by placing either word here:_______

________________amount of profit or loss from above (use a + for profit and for loss)

Show work here:

C. From the opening case in chapter 14 Spotify and SoundCloud

1. Would these companies be able to grow without expanding globally? (one to two sentence max.)

2. do you use Spotify or Soundcloud? Yes or no

3. List the key points of this opening case.

A company based in the Netherlands has entered into a contract to sell digital readers to an oil firm in Nigeria. The contract calls for the delivery of 40 thousand pieces/units. The Nigerian company will pay 28 Euro for each unit. The payment will be made the Netherlands company in Euros.

The Netherlands Company does not manufacture the units but buys them from a firm in China and is thus a re-seller. The Netherlands firm will pay in Chinese Yuan. The payment will be 250 Yuan per unit.

In addition the Netherlands company will have the following additional costs directly related to this contract.

Total transportation costs= 5,000 Euro total

Insurance, customs brokerage, warehousing= .40 Euro per unit.

Exchange rate when contract signed January

1 Euro = 468.83 Nigerian Naira

1 Naira = .0021 Euro

1Euro = 9 Yuan

1 Yuan = .1111 Euro

1. Would the Netherlands firm earn a profit or loss on this contract if the transaction was completed today?

Indicate profit or loss by placing either word here:_______

________________amount of profit or loss from above (use a + for profit and for loss)

Show work here:

2.

What would happen to the Netherlands firms profit or loss from this contract should a depreciation of the Euro occur relative to the Naira. (Select increase profit, increase loss, decrease profit, decrease loss, or no change and place this answer on line below)

_________Ans. Why?

3. What would happen to the Netherland firms profit or loss from this contract should a depreciation of the China Yuan occurred relative to the Euro? (Increase profit, decrease profit, increase loss, decrease loss, or no change on line below)

____________Ans. Why?

4. Would the firm in Nigeria prefer the Naira to appreciate or depreciate in regards to importing good from Euro currency countries? (Answer Naira appreciate or Naira depreciate)

____________Ans. Why?

Assume between the time the contract was signed in January and months later when the transaction was completed, that the exchange rates changed to the following: (assume all receipts and payments occurred the same day month after the January contract was signed)

1 Euro = 500 Nigerian Naira

1 Naira = .002 Euro

1Euro = 7.33 Yuan

1 Yuan = .1364 Euro

5. What is the end financial result for the Netherlands firm regarding this transactions?

Indicate profit or loss by placing either word here:_______

________________amount of profit or loss from above (use a + for profit and for loss)

Show work here:

C. From the opening case in chapter 14 Spotify and SoundCloud

1. Would these companies be able to grow without expanding globally? (one to two sentence max.)

2. do you use Spotify or Soundcloud? Yes or no

3. List the key points of this opening case.