Exchange Rate Exercise Question 2: Mexican Textiles Consider a Mexican textile firm that knits sweaters for sale in the United States. The firm incurs total costs of 16 pesos/sweater and sells the sweaters to a U.S. department store for 5 USD/sweater. The exchange rate is 4 peso/USD. A. What is the firm's markup per sweater as a percentage of revenues? a) 25% b) 4% c) 31% d) 20% B. If the peso is devalued 20%, what is the new exchange rate? a) 3.2 peso/$ b) 5 peso/$ c) 4.8 peso/s d) 3.33 peso/$ C. If the firm keeps dollar prices and peso costs constant, what is its markup per sweater as a percentage of revenues after the devaluation? a) 0% b) 4% c) 33% d) 36% D. If the firm decides to keep its gross margin per sweater constant (at 20%) and expand sales, what would the new dollar price be following the devaluation? a) $4,00 b) $3.84 c) $3.75 d) $4.25