Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-Z sports cars for the next three years. The company will build the cars in Japan and ship them to the United States for sale. The current indirect rate is ¥114.2048 per dollar. Just before Copy-Cat starts the project, the Japanese and U.S. governments announce new anticipated inflation numbers. The anticipated inflation rate for parts and labor in Japan is 2.9% over the next three years, and the anticipated overall inflation rate for Japan is 5.7% over the next three years. The expected overall inflation rate in the United States is 3.9% over the next three years. (The stated rates are on an annual basis.) If Copy-Cat plans to sell 500 cars a year at an initial price of $44,000 and the cost of production is ¥4,016,500, what is the annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Will these anticipated inflation rates affect the profitability of the vintage 240-Zs? Why? What is the expected sales revenue per car in dollars for Copy-Cat in year 1? (Round to the nearest cent.) What is the expected sales revenue per car in dollars for Copy-Cat in year 2? (Round to the nearest cent.) What is the expected sales revenue per car in dollars for Copy-Cat in year 3? (Round to the nearest cent.) What is the expected production cost per car in dollars for Copy-Cat in year 1? (Round to the nearest cent.)
Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-Z sports cars for the next three years. The company will build the cars in Japan and ship them to the United States for sale. The current indirect rate is ¥114.2048 per dollar. Just before Copy-Cat starts the project, the Japanese and U.S. governments announce new anticipated inflation numbers. The anticipated inflation rate for parts and labor in Japan is 2.9% over the next three years, and the anticipated overall inflation rate for Japan is 5.7% over the next three years. The expected overall inflation rate in the United States is 3.9% over the next three years. (The stated rates are on an annual basis.) If Copy-Cat plans to sell 500 cars a year at an initial price of $44,000 and the cost of production is ¥4,016,500, what is the annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Will these anticipated inflation rates affect the profitability of the vintage 240-Zs? Why? What is the expected sales revenue per car in dollars for Copy-Cat in year 1? (Round to the nearest cent.) What is the expected sales revenue per car in dollars for Copy-Cat in year 2? (Round to the nearest cent.) What is the expected sales revenue per car in dollars for Copy-Cat in year 3? (Round to the nearest cent.) What is the expected production cost per car in dollars for Copy-Cat in year 1? (Round to the nearest cent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-Z sports cars for the next three years. The company will build the cars in Japan
and ship them to the United States for sale. The current indirect rate is ¥114.2048 per dollar. Just before Copy-Cat starts the project, the Japanese and U.S.
governments announce new anticipated inflation numbers. The anticipated inflation rate for parts and labor in Japan is 2.9% over the next three years, and the
anticipated overall inflation rate for Japan is 5.7% over the next three years. The expected overall inflation rate in the United States is 3.9% over the next three years.
(The stated rates are on an annual basis.) If Copy-Cat plans to sell 500 cars a year at an initial price of $44,000 and the cost of production is ¥4,016,500, what is the
annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Will these
anticipated inflation rates affect the profitability of the vintage 240-Zs? Why?
What is the expected sales revenue per car in dollars for Copy-Cat in year 1?
$ (Round to the nearest cent.)
What is the expected sales revenue per car in dollars for Copy-Cat in year 2?
$ (Round to the nearest cent.)
What is the expected sales revenue per car in dollars for Copy-Cat in year 3?
$ (Round to the nearest cent.)
What is the expected production cost per car in dollars for Copy-Cat in year 1?
S (Round to the nearest cent.)
What is the expected production cost per car in dollars for Copy-Cat in year 2?
$ (Round to the nearest cent.)
What is the expected production cost per car in dollars for Copy-Cat in year 3?
Transcribed Image Text:(Round to the nearest dollar.)
What is the expected profit in dollars for Copy-Cat in year 2? Enter a negative number for a loss.
$
(Round to the nearest dollar.)
What is the expected profit in dollars for Copy-Cat in year 3? Enter a negative number for a loss.
$
(Round to the nearest dollar.)
Will these new anticipated inflation rates affect the production of vintage 240-Zs? Why? (Select the best response.)
O A. The profit (loss) is falling (rising) each year as the revenue is growing at a higher inflation rate than the production costs despite the weakening yen against the
dollar.
O B. The profit (loss) is rising (falling) as the revenue is growing at a higher inflation rate than the production costs and the weakening yen against the dollar allows
for the production costs to fall even more.
OC. The profit (loss) is falling (rising) each year as the yen is weakening against the dollar despite different inflation rates in the two countries.
O D. The profit (loss) is rising (falling) each year as the revenue is growing at a higher inflation rate than the production costs despite the weakening yen against the
dollar.
Click to select your answer(s).
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