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You are an international shrimp trader. A food producer in the Czech Republic offers to pay you...

Question:

You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.4 million Czech korun today in exchange for a year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 3.1 million Thai baht today. If the current competitive market exchange rates are 25.36 korun per dollar and 41.44 baht per dollar, what is the value of this exchange to you?

A) The cost of the shrimp from the Thai supplier in dollars is $ _____

B) The amount the Czech producer is willing to pay for the shrimp in dollars is $ _____

C) The profit you would make from this trade is $ _____

Profit:

Profit-making is the primary motive of every business organization. Profit is calculated by deducting all the expenses from the revenue. The business is feasible if it is making sufficient profit for the investors.

Answer and Explanation:

Given:

Czech Republic pay = 2.4 million Czech koruna

Thai supplier supply = 3.1 million Thai baht

Czech Republic exchange rate = 25.36 koruna per dollar

Thai exchange rate = 41.44 baht per dollar

Calculation:

A)

Cost of the shrimp from the Thai supplier in dollars can be computed as follow:

{eq}Cost \ of \ the \ shrimp \ = \ \dfrac{Thai \ supplier \ supply}{Thai \ exchange \ rate} \\ Cost \ of \ the \ shrimp \ = \ \dfrac{3.1 \ million}{41.44} \\ Cost \ of \ the \ shrimp \ = \ \$74,806.95 {/eq}


B)

Amount the Czech producer is willing to pay for the shrimp in dollars can be computed as follow:

{eq}Selling \ price \ = \ \dfrac{Czech \ Republic \ pay}{Czech \ Republic \ exchange \ rate} \\ Selling \ price \ = \ \dfrac{2.4 \ million}{25.36} \\ Selling \ price \ = \ \$94,637.22 {/eq}


C)

Amount of profit would make from this trade can be computed as follow:

Profit = Selling price - Cost of the shrimp

Profit = 94,637.22 - 74,806.95

Profit = $19,830.27


Learn more about this topic:

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How to Calculate Economic Profit: Definition & Formula

from Intro to Business: Help and Review

Chapter 3 / Lesson 11
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