Richland Crane (A). Richland Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16,000 units per year at the yuan equivalent of USD22,000 each. The Chinese yuan (CNY) has been trading at CNY8.20 = USD1.00, but a Hong Kong advisory service predicts the yuan will drop in value next week to CNY9.10 = USD1.00, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Richland Crane faces a pricing decision in the face of the impending devaluation. It may either (1) maintain the same yuan price and in effect sell for fewer dollars, 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. Direct costs are 75% of the U.S. sales price. a. What would be the short-run (one-year) impact of each pricing strategy? b. Which do you recommend? a. If Richland Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits? USD (Round to the nearest dollar.)
Richland Crane (A). Richland Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16,000 units per year at the yuan equivalent of USD22,000 each. The Chinese yuan (CNY) has been trading at CNY8.20 = USD1.00, but a Hong Kong advisory service predicts the yuan will drop in value next week to CNY9.10 = USD1.00, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Richland Crane faces a pricing decision in the face of the impending devaluation. It may either (1) maintain the same yuan price and in effect sell for fewer dollars, 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. Direct costs are 75% of the U.S. sales price. a. What would be the short-run (one-year) impact of each pricing strategy? b. Which do you recommend? a. If Richland Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits? USD (Round to the nearest dollar.)
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:Richland Crane (A). Richland Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16,000 units per year at the yuan equivalent of USD22,000 each. The Chinese yuan (CNY) has been trading at CNY8.20 = USD1.00, but a
Hong Kong advisory service predicts the yuan will drop in value next week to CNY9.10 = USD1.00, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Richland Crane faces a pricing decision in the face of the impending
devaluation. It may either (1) maintain the same yuan price and in effect sell for fewer dollars, 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. Direct costs are 75% of the U.S. sales price.
a. What would be the short-run (one-year) impact of each pricing strategy?
b. Which do you recommend?
a. If Richland Crane maintains the same yuan price and same unit volume, what will be the firm's gross profits?
USD
(Round to the nearest dollar.)
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