Dell is selling 30,000 units in Europe at an average price of €1,500 per unit. Both the spot and forward exchange rates are $1.20/€. The cost of each unit in dollars is $1,300 per unit. The elasticity of demand for Dell computers in Europe is ε = 1.5.
Which of the following would be an effective hedging assuming zero passthrough?
buy $45 million forward
sell €45 million forward
buy $20 million forward
sell €20 million forward