Rolls-Royce Turbine Engines. 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 in the popup window, ! , 20072009, the pound steadily weakened against the euro. Rolls-Royce has traditionally denominated its sales contracts with Airbus in Airbus' home currency, the euro. After completing the table answer the following questions: a. Assuming each Rolls-Royce engine marketed to Airbus is initially priced at 22.72 million each, how has the price of that engine changed over the period shown when priced in euros at the current spot rate? b. Complete the table in the popup window, What is the cumulative percentage change in the price of the engine in euros for the two-year period? c. If the price elasticity of demand for Rolls-Royce turbine sales to Airbus is relatively inelastic, and the price of the engine in British pounds never changes over the period, what does this price change mean for Rolls-Royce's total sales revenue on sales to Airbus of this engine? d. Compare the prices and volumes for the first quarter of each of the three years shown in the table in part b above. Who has benefitted the most from the exchange rate changes? Date Price millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 1Q 2007 22.72 1.4923 33.91 20 2007 22.72 1.4705 3Q 2007 22.72 1.4695 4Q 2007 22.72 1.4143 1Q 2008 22.72 1.3188 20 2008 22.72 1.2635 Date Price millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 3Q 2008 22.72 1.2573 4Q 2008 22.72 1.1914 1Q 2009 22.72 1.1013 2Q 2009 22.72 .1373 3Q 2009 22.72 1.1486 4Q 2009 22.72 1.1073 1 Prol i Data Table Rolls Rolls rs in Continental E dominantly denom e has traditionally the p with bf that engine chan a. As wher b.ca c. Ift Date Price (in millions of pounds, ) Spot rate (/L) Price (in millions of euros, ) Sales volume (engines) Total cost to Airbus (millions of ) Total revenue to RR (millions of ) 1Q 2007 22.72 1.4923 33.91 200 6,782 4,544 1Q 2008 22.72 1.3188 29.96 220 6,591 4,998 1Q 2009 % Chg 22.72 % 1.1013 25.02 _ % 240 20.00 % 6,005 5,453 in euros for the tv gine in British pour perio d.co rate Who has benefitte Print Done Date Price (millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 1Q 2007 22.72 1.4923 33.91 2Q 2007 22.72 1.4705 - 3Q 2007 22.72 1.4695 4Q 2007 22.72 1.4143 - 1Q 2008 22.72 1.3188 - 2Q 2008 22.72 1.2635 6 Date Price (millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 3Q 2008 22.72 1.2573 . 4Q 2008 22.72 1.1914 10 2009 22.72 1.1013 3Q 2009 22.72 1.1486 20 2009 22.72 1.1373 4Q 2009 22.72 1.1073