Murray exports (US) exports heavy crane equipment to several chinese dock facilt
ID: 2691615 • Letter: M
Question
Murray exports (US) exports heavy crane equipment to several chinese dock facilties. Sales ares currently 10,000 units per year at the yuan equivalent of $24,000 each. The Chinese yuan(renminbi.has been trading at Yuan8.20/$, but a Hong Kong advisory service predicts nthe renminbini will drop in value next week to Yuan9.00/$, after which it will remain unchanged for at least a decade. Accepting this forecastas given, Murray exports faces a pricing decision in the face of the impending devaluation. It may either1) maintain the same yuan price and in effect sell for fewerdollars, in which case Chinese volume will not change: or 2) maintain the same dollar price , raise the yuan price in China to offset the devaluation, and experience a 10% drop in unit volume. Deirect costs ar 75% of U.S sales price. A. What would be the short-run(one-year) impact of each pricing stragety? B. Which do recommend?Explanation / Answer
Murray exports (US) exports heavy crane equipment to several chinese dock facilties. Sales ares currently 10,000 units per year at the yuan equivalent of $24,000 each. The Chinese yuan(renminbi.has been trading at Yuan8.20/$, but a Hong Kong advisory service predicts nthe renminbini will drop in value next week to Yuan9.00/$, after which it will remain unchanged for at least a decade. Accepting this forecastas given, Murray exports faces a pricing decision in the face of the impending devaluation. It may either1) maintain the same yuan price and in effect sell for fewerdollars, in which case Chinese volume will not change: or 2) maintain the same dollar price , raise the yuan price in China to offset the devaluation, and experience a 10% drop in unit volume. Deirect costs ar 75% of U.S sales price. A. What would be the short-run(one-year) impact of each pricing stragety? B. Which do recommend?
Assumptions Values Sales volume per year 10,000 US dollar price per unit $24,000 Direct costs as % of US$ sales price 75% Direct costs per unit $18,000.00 Spot exchange rate, yuan/$ 8.2000 Expected spot rate, yuan/$ 9.2000 Unit volume decrease if price increased -10% Case 1 Case 2 Sales to China Same Yuan Price Same US$ Price US dollar price per unit $21,391.30 $24,000.00 Unit volume 10,000 9,000 Sales revenue $213,913,043 $216,000,000 Less direct costs ($180,000,000) ($162,000,000) Gross profits $33,913,043 $54,000,000 Better.Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.