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international transactions

Please give some thought to how the company can make money or lose money by simply engaging in international transactions. The net sales figures from the European region are as followed:

Year 1 sales = 125 million euros
Year 2 sales = 150 million euros
Year 3 sales = 175 million euros
Year 4 sales = 200 million euros
Year 5 sales = 250 million euros

The forecasted exchange rate for euros to U.S. dollars is between 0.40 to 1.20 (which is 0.40 euros/US$1 to 1.20 euros/US$1), and the current exchange rate is 1 euro for US$1.

use these two extreme points to analyze how European revenue would translate to U.S. dollars over the 5-year time period.

explains the forecasted direction for exchange rates and what that means to the company's revenue and profits.

Solution Preview

The total realization from Sales in the European region in Euros will be:

125+ 150+175+200+250 million= 850 million Euros.

If we estimate it by the current exchange rate of 1 Euro=1USD, the total revenues that would translate to US dollars over the 5 year period will be 850 million USD.However, given the forecasted exchange rate for Euros to US dollars, the amount translated in US dollars can vary by a huge margin.Let us see the estimated receipts in ...

Solution Summary

Please give some thought to how the company can make money or lose money by simply engaging in international transactions.

$2.19