Johnson of NJ is considering selling its luxury boats to a German company. Johnson sells a boat for $98000 which has a total cost of $81000 per boat. The
German company can sell 15 boats per month in Europe which is priced in euros. The German company will pay Johnson 75384 euros for each boat. The German
company orders 15 boats and will pay in 90 days. The current spot exchange rate today is $1.30 per euro.

1. What is Johnson%u2019s projected gains and losses from this proposed arrangement at the current exchange rate of $1.30 per euro. What happens if the
exchange rate changes to $1.37 per euro? At what exchange rate will the company breakeven?

2. What happens to the forward exchange rate if German interest rate is 7% and US interest rate is 2%. Does this affect the profitability of Johnson? By how
much?

3. Should Johnson pursue the international sales.? Why or why not?