You own a small record label. You sell CDs through your Web site for $15, including shipping and handling. You get an offer from someone who owns a record store in Germany who would like to sell your CDs. He wants to buy them at $10 each and sell them for $30. He says his profit from each sale would be €12 and he will split it with you. Assume the between the dollar and the euro is $1 = €2.
a. How much profit would you get from the sale of each CD in the German store?
b. How much is that profit in dollars?
c. Is this a good business opportunity for you? Why or why not?
d. If the FX rate between the dollar and the euro falls to $1 = €1, will this still be a good business idea for you? Why or why not?
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