Assume the same facts as in Manitowoc Crane (A). Additionally, financial management believes that if it maintains

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Assume the same facts as in Manitowoc Crane (A). Additionally, financial management believes that if it maintains the same yuan sales price, volume will increase at 12% per annum for eight years. Dollar costs will not change. At the end of ten years, Manitowoc's patent expires and it will no longer export to China. After the yuan is devalued to Yuan9.20/$, no further devaluations are expected. If Manitowoc Crane raises the yuan price so as to maintain its dollar price, volume will increase at only 1% per annum for eight years, starting from the lower initial base of 9,000 units. Again dollar costs will not change and at the end of eight years Manitowoc Crane will stop exporting to China. Manitowoc's weighted average cost of capital is 10%. Given these considerations, what should be Manitowoc's pricing policy?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Multinational Business Finance

ISBN: 978-0133879872

14th edition

Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett

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