Change the exchange rate model in Example 7.2 slightly so that the company is now a UK manufacturing company producing for a U.S. market. Assume that the unit cost is now £75, the demand function has...

Change the exchange rate model in Example 7.2 slightly so that the company is now a UK manufacturing company producing for a U.S. market. Assume that the unit cost is now £75, the demand function has the same parameters as before (although the price for this demand function is now in dollars), and the exchange rate is the same as before. Your Solver solution should now specify the optimal price to charge in dollars and the optimal profit in pounds.

EXAMPLE 7.2 PRICING WITH EXCHANGE RATE CONSIDERATIONS AT MADISON

We continue Example 7.1 but now assume that Madison manufactures its product in the United States and sells it in the United Kingdom (UK). Given the prevailing exchange rate in dollars per pound, Madison wants to determine the price in pounds it should charge in the UK so that its profit in dollars is maximized. The company also wants to see how the optimal price and the optimal profit depend on exchange rate fluctuations.

Objective To use a nonlinear model to find the price in pounds that maximizes the profit in dollars.

WHERE DO THE NUMBERS COME FROM?

The only new input in this model is the exchange rate, which is readily available. For example, you can find exchange rates at http://www.oanda.com/convert/classic.