Question
Wildcat Inc. a U.S. based exporter that exclusively sells its products in Australia. Wildcat, expects to sell 2,000 units at a price of AUD 10.00
Wildcat Inc. a U.S. based exporter that exclusively sells its products in Australia. Wildcat, expects to sell 2,000 units at a price of AUD 10.00 per unit. Wildcat currently produces in Phoenix, AZ and has a variable production cost of USD 8.10 per unit, and total fixed costs of USD 5,000. Wildcat puts in place an FX pass through policy of 50%. Assuming that Wildcat Inc. can change its price without affecting quantity demanded in the Australian market. What is Wildcats FX operating exposure with the FX pass through policy? (Set up the base case at X USD/AUD= 1.50 and then recalculate the operating cash flow based using the new sales price at X USD/AUD= 1.35).
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