Question
Rolls-Royce is struggling with its pricing strategy with a number of its major customers in Continental Europe, particularly Airbus. Since Rolls-Royce is a British company
Rolls-Royce is struggling with its pricing strategy with a number of its major customers in Continental Europe, particularly Airbus. Since Rolls-Royce is a British company with most manufacturing of the Airbus engines in the United Kingdom, costs are predominantly denominated in British Pounds. But in the period shown, 2007-2009, the pound steadily weakened against the euro. Rolls-Royce has traditionally denominated its sales contracts with Airbus in Airbus' home currency, the euro.
Date | 1Q 2007 | 2Q 2007 | 3Q 2007 | 4Q 2007 | 1Q 2008 | 2Q 2008 | 3Q 2008 | 4Q 2008 | 1Q 2009 | 2Q 2009 | 3Q 2009 | 4Q 2009 | ||||||||||||
Price (millions of pounds, ) | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | 22.50 | ||||||||||||
Spot rate (euro = 1.00 pound) | 1.4918 | 1.4733 | 1.4696 | 1 | 1.3198 | 1.2617 | 1.2590 | 1 | 1.1017 | 1.1375 | 1.1467 | 1 |
1) Compute the Euro value price in Q4 of 2007.
2) What is the price change in Euro for the engine over the time period considered?
3)
Now consider the following information regarding sales of the engine over the same period.
1Q 2007 | 4Q 2008 | 4Q 2009 | ||||
Price (in millions of ) | 22.50 | 22.50 | 22.50 | |||
Spot rate (/) | 1.4918 | 1.204 | 1.113 | |||
Sales volume (engines) | 200 | 220 | 240 |
What was the percentage change in total expenditure by Airbus for engine purchases from Rolls-Royce over the period?
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