Analyst,

I need your help in preparing a study to localize our product, the Volision E10 ultrasound machine,

to the country of Chile. Chiles currency, the Chilean peson (CLP) has weakened considerably in

the past year against the US dollar (USD) causing the translation of our revenue from our Chilean

sold units to degrade signifcantly. Te leadership team has requested that we fnd a way to mitigate

this currency volatility. One way we can do this is to better match the currency of our costs to the

currency of our revenue. As our sales in Chile constitute a larger mix of the total global sales of our

portfolio going forward, localizing the product and creating some CLP cost exposure may help

balance our overall currency portfolio and minimize the proft impact of volatile currency

movements.

See the note below for additional texture and key fnancial data that will be required for the analysis.

Your analysis should provide a proft impact sensitivity analysis using the relevant range of

CLP:USD provided below.

NB:

1. Your analysis should focus on a decision analysis for the localization alternative. Te US

sourcing location is in our present Business Plan. Provide an incremental view to our

business plan shown in millions (USD).

2. Te localization alternative will have no impact on our sale revenue, so all the data I have

sent over is cost related. Tere is no need to include revenue in the incremental decision

analysis.

3. Given the tight timing on this project, assume a one-period analysis for this study for

simplicity (i.e., calculate the proft impact for one-year). At a later date, with better data and

an aligned cost of capital, we will analyze the entire fve-year product cycle.

4. Ryan, from the Corporate Economics team, suggested we study a three-point range for the

exchange rate (500:1, 600:1, and 700:1).

As you will see, there are trade-offs with the localization alternative. Let me know your

recommendation based on the available data. And let me know of other risks or concerns (fnancial

and non-fnancial) that we should communicate to our leadership team.

Tanks for your help on this one!

Johnny B. Goode,

Manager New Model Program

Manager,

As a follow-up to our discussion, here is the necessary data to complete the localization study

requested by the leadership team prior to the next Board meeting.

U.S. Source (refects our present Business Plan):

Investment - $600 million in re-tooling an existing facility where the new equipment will be

produced.

Contribution Costs All shown in USD.

Chilean Source

Investment - $1 billion will enable us to build a new facility where the new equipment will be

produced.

Contribution Cost All costs sourced in CLP. Data shown has been converted using the noted

exchange rate as assumed in our latest business plan

Data for Localization Alternatives USA USA CLP CLP Manufacturing Source Sales Location CLP USA USA CLP 45,000 55,000 Annual Sales (units) Initial Investment (in mill.) $ 55,000 1,000 45,000 1,000 600 $ 600 $ $ $ 18,500 $ 18,000 $ 20,500 1,000 1,600 2,500 1,000 Contribution Cost Impact (per unit) Material Cost $ 20,000 Freight 2,500 Variable Labor 1,600 Duty & Tax 10,000 Total CCI (per unit) 34,100 800 800 100 800 3,000 23,200 22,600 22,800 Total cost (in mill.) $ 1,535 $ 1,276 $ 1,243 $ 1,026 Exchange Rate RIC/USD USD/RIC 600 600 0.001666667 0.001666667 Data for Localization Alternatives USA USA CLP CLP Manufacturing Source Sales Location CLP USA USA CLP 45,000 55,000 Annual Sales (units) Initial Investment (in mill.) $ 55,000 1,000 45,000 1,000 600 $ 600 $ $ $ 18,500 $ 18,000 $ 20,500 1,000 1,600 2,500 1,000 Contribution Cost Impact (per unit) Material Cost $ 20,000 Freight 2,500 Variable Labor 1,600 Duty & Tax 10,000 Total CCI (per unit) 34,100 800 800 100 800 3,000 23,200 22,600 22,800 Total cost (in mill.) $ 1,535 $ 1,276 $ 1,243 $ 1,026 Exchange Rate RIC/USD USD/RIC 600 600 0.001666667 0.001666667