Your company is currently operating in Argentina. Management is concerned about to what extent the Argentine peso will be devalued. It wants to examine two scenarios: one where the currency drops 14% and one where it drops 26%. Currently, the exchange rate is 93 pesos (ARS$ 93) to 1 US dollar (US$1).

Contribution after marketing in Argentina was 21% of sales (see Exhibit). Your goal is to maintain this percentage.

Exhibit: Argentina Contribution after Marketing (ARS$ Argentine Pesos)

 

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Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Contribution after Marketing Units 46 ARS 325.9 100% 183.3 142.6 73.3 % 69.3 56% 44% 22% 21% QUESTION 1 How would the devaluation of the Argentine peso (ARS$) affect your contribution in the home currency (US$)? Current contribution in USD (home currency): $ 0.001 Contribution in USD after 14% drop: USD $ 0.000 Contribution in USD after 26% drop: USD $ 0.000 Million Millions Million Unit Sales Manufacturer Sales Costs Gross Margin Total Marketing Contribution after Marketing Units 46 ARS 325.9 100% 183.3 142.6 73.3 % 69.3 56% 44% 22% 21% QUESTION 1 How would the devaluation of the Argentine peso (ARS$) affect your contribution in the home currency (US$)? Current contribution in USD (home currency): $ 0.001 Contribution in USD after 14% drop: USD $ 0.000 Contribution in USD after 26% drop: USD $ 0.000 Million Millions Million

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