(a)ABC is considering expanding its sales of orange juice overseas

The answer of the following question is given below in a detailed manner as follows :

Ans.A) Let's consider ABC be an American company

The local currency is $ (dollars)

Calculation of profit from the sale of juice in $

PROFIT = Sale value in $ - Purchase value in $

Sale value in $

Sold in the UK for £ 1.52

The exchange rate given is 1 British pound = 1.33 US dollars

that is, if we give 1 pound sterling we will get 1.33 us $

so if we sell 1.52 pounds sterling we will get 1.52 * 1.33 us $ = 2.0216 us $

so the sale value in $ is 2.0216 us $

Purchase value in $

Produced in Australia at a cost of A $ 2.10

We require a rate for Australian dollars in US dollars, but Australian dollars are given per British pound.

so we should convert to sterling first and then convert sterling to us dollars

so if we sell 1 Australian dollar we will get .55 British pounds, so we will get 2.1 * .55 British pounds = 1.155 British pounds

If we give 1 British pound we will get 1.33 us $

so if we sell 1,155 pounds sterling we will get 1,155 * 1.33 us $ = 1.53615 us $

Thus

PROFIT = Sale value in $ - Purchase value in $

PROFIT = 2.0216 us $ -1.53615 us $

PROFIT = 0.48545 us $

Ans.C) So assume if we send orange juice to Japan and the sale value is 215 yen

According to PPP (Purchasing Power Parity Theorem), there should be no arbitrage gains or losses, that is, an item should have the same price in all countries in simple form.

The retail value of the juice in the US is $ 2.0216

The retail value of the juice in Japan is 215 yen.

even if we converted 215 yen to US dollars, we would get a selling price of 2.0216 US dollars

therefore, the exchange rate is 2.0216 us $ * YEN / US $ = 215 YEN

1 US dollar = 215 / 2.0216 yen

1 US dollar = 106.3514 yen (16.3514 yen per US dollar).