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 Arbus engines in the United Kingdom, costs are predominantly denominated in British pounds. But in the period shown in the popup window, 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. After completing the table answer the following questions: a. Assuming each Rolls-Royce engine marketed to Airbus is initially priced at $22.50 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, US What is the cumulative percentage change in the price of the engine in euros for the two-year period? e. 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? - Vi Vi T vi v du khc 1 Giai Ma Ha 1 M v N L M NU Vua PH I N H 4 Famian vi Miu Miu MU 4 1 MUI TRN B. The price of the engine in euros has decreased over the three-year period due to the appreciation of the euro over the period. C. The price of the engine in euros has decreased over the three-year period due to the depreciation of the euro over the period. D. The price of the engine in euros has increased over the three-year period due to the depreciation of the euro over the period b. Complete the table below (Round to two decimal places) % Chg Incorr L % Date Price (in Millions of pounds. E) Spot rate (DE) Price (in millions of euros, Sales volume (engines) Total cost to Airbus (millions of ) Total revenue to RR (millions of) 19 2007 22.50 1.4918 33.57 200 6,714 1Q 2000 22.50 1.3198 29.70 220 6,534 4,950 10 2009 22 50 1.1017 24.79 240 5,950 6,400 % 20.00 % % 4.500 % Data table Date 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 1Q 2007 22.50 E 22.50 22.50 22.50 22.50 22.50 Price (millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 1.4918 1.4733 1.4696 1.4107 1.3198 1.2617 E 33.57 3Q 2008 40 2008 10 2009 20 2009 3Q 2009 4Q 2009 22.50 22.50 22.50 22.50 22.50 E Date Price (millions of pounds, ) Spot rate (euro = 1.00 pound) Price (millions of euros, ) 22.50 1.2590 1.1924 1.1017 1.1375 1.1467 1.1066 tel Print Done o X a Data table Date 1Q 2007 1Q 2008 1Q 2009 % Chg 22.50 22.50 22.50 % IC 1.4918 1.3198 1.1017 Price (in millions of pounds, ) Spot rate (/) Price (in millions of euros, ) Sales volume (engines) 10 33.57 29.70 % 24.79 240 200 220 20.00 % Total cost to Airbus (millions of ) 6,714 6,534 % Total revenue to RR (millions of ) 5,950 5,400 4,500 4,950 % Print Done