Assume that Nissan spends an average of 1.875 million yen to manufacture a car i
ID: 2769831 • Letter: A
Question
Assume that Nissan spends an average of 1.875 million yen to manufacture a car in Japan, plus $2,600 to market and distribute the car in the United States. Furthermore, Nissan adds 10% margin to price the car. The exchange rate is $1 = ¥100
Assuming that the exchange rate at the end of the year is expected to be $1 = ¥80, what will be the impact of the exchange rate on the dollar cost the auto?
If Nissan had wanted to sell the car at the same price at which they were selling earlier, by how much would it have to cut costs, given the exchange rate in part a above.
If the same car were manufactured in the United States at a cost of $19,000 and 40 percent of parts were imported from Japan, what impact would the different exchange rates have on the dollar cost?
Suggest some strategies that can be used by Nissan to counter strong yen.
Suggest some strategies that can be used by Nissan in a weak yen environment.
Suppose $1 = ¥125. The U.S. inflation rate is 2% and Japanese inflation rate is 4%.The exchange rate is fixed. What happens to the competitiveness of Japanese companies versus United States? Explain clearly.
Explanation / Answer
Price of car
Price of the car
Yen
Exchange 1$ = yen
$
mfg cost
1875000
100
18750
Distribution cost
2600
10% margin
2135
Price of car
23485
Assuming that the exchange rate at the end of the year is expected to be $1 = ¥80, what will be the impact of the exchange rate on the dollar cost the auto?
Yen
Exchange 1$ = yen
$
mfg cost
1875000
80
23438
Distribution cost
2600
10% margin
2604
Price of car
28641
If Nissan had wanted to sell the car at the same price at which they were selling earlier, by how much would it have to cut costs, given the exchange rate in part a above.
23438-18750 = $4688*80=375040yen
If the same car were manufactured in the United States at a cost of $19,000 and 40 percent of parts were imported from Japan, what impact would the different exchange rates have on the dollar cost?
Yen
Exchange 1$ = yen
$
Yen
Exchange 1$ = yen
$
mfg cost 40%
760000
100
7600
mfg cost 40%
760000
80
9500
mfg cost 60%
11400
mfg cost 60%
11400
Distribution cost
2600
Distribution cost
2600
10% margin
2160
10% margin
2350
Price of car
23760
Price of car
25850
Suppose $1 = ¥125. The U.S. inflation rate is 2% and Japanese inflation rate is 4%.The exchange rate is fixed. What happens to the competitiveness of Japanese companies versus United States? Explain clearly.
The more the inflation rate makes every thing costly due to which the purchasing price of currency falls and if compare with the currency of other country it becomes weaker.
Here 1$ = 125 yen
Inflation rate 2%=4%
1.02$=130
1$=127.45$
In this case since inflation rate of japan is more than US the yen became weaker than $. In this scenario there will be competitive advantage to USA companies in international market. In international market japan will have to give goods worth 127.45 for 1$ compare to earlier it was giving goods worth 125 yen for 1 $. Hence the cost of Japanese goods will increase and it will be a competitive advantage to USA.
Yen
Exchange 1$ = yen
$
mfg cost
1875000
100
18750
Distribution cost
2600
10% margin
2135
Price of car
23485
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