Smith (U.S.) exports heavy equipment to several Japanese facilities. Sales are currently 8,000 units per year...

 

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Smith (U.S.) exports heavy equipment to several Japanese facilities. Sales are currently 8,000 units per year at the yen equivalent of $5,000 each. The Japanese yen has been trading at yen 109/$. Expectation is that it will devalue to Yen 115/$ in the near future. The fallout of this change in the yen/USD is: (1) US company maintains the same yen price and in effect sell for fewer dollars, in which case Japanese volume will not change; or (2) maintain the same dollar price, raise the yen price in Japan to offset the devaluation, and experience a 10% drop in unit volume. Direct costs are 75% of the U.S. sales price. What do you recommended and why? Smith (U.S.) exports heavy equipment to several Japanese facilities. Sales are currently 8,000 units per year at the yen equivalent of $5,000 each. The Japanese yen has been trading at yen 109/$. Expectation is that it will devalue to Yen 115/$ in the near future. The fallout of this change in the yen/USD is: (1) US company maintains the same yen price and in effect sell for fewer dollars, in which case Japanese volume will not change; or (2) maintain the same dollar price, raise the yen price in Japan to offset the devaluation, and experience a 10% drop in unit volume. Direct costs are 75% of the U.S. sales price. What do you recommended and why?

Answer rating: 100% (QA)

answer Given the options presented Maintain the same yen price This means the US company will effect... View the full answer