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ACME INDUSTRIAL PUMPS-B "After significant analysis, including PESTEL. Hofstede's, and ample on-the-ground research. we believe the U.K. is a good place to start our global push and grow our know-how." - Victoria Pyott, ACME CEO The Situation: Victoria Pyott, and the Acme Industrial Pumps have decided to take their initial steps into the global market by exporting their products from the U.S. to the U.K. The team has identified a group of quality distributors and has hired a consultant to help manage the importing into the U.K. process and paperwork One area the firm is concerned about is their exposure to exchange rate fluctuations between the U.S. dollar and British Pound. You and your team members have been engaged on long-term contract to help ACME navigate this issue. Solve for the following situations: Situation 1--At the start of the Relationship The current exchange rate is as follows: 1 British Pound (BP) =$1.50 USD $1.00 USD = .6667 BP Your cost to manufacture your pump is $500 USD. You write a contract to sell the product to the distributor for $1,000 USD. All transactions between you in the distributor will be conducted in dollars. (This means that the U.K. distributors will need to convert pounds to dollars to pay you.) How many pounds will the pump cost them at $1,000? Situation 2-Profit at the Current Exchange Rates Your distributors sell the pumps at 1,000 BP to their customers. a. How much profit are they making per pump in pounds? b. How much profit are you making per pump

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