Question: Papa Johns Pizza (NASDAQ:PZZA) opened its first store in Suzhou, China. The price of a large Epic Meatz pizza in Suzhou is 119.00 Chinese yuan.

Papa Johns Pizza (NASDAQ:PZZA) opened its first store in Suzhou, China. The price of a large Epic Meatz pizza in Suzhou is 119.00 Chinese yuan. The price of the same Epic Meatz pizza is $12.90 in Chicago, IL. The exchange rate between Chinese yuan () and U.S dollars is 6.81/$.

(a) According to purchasing power parity (applied to Papa Johns prices), is the Chinese yuan overvalued or undervalued? By what percent? (b) Fill in the four missing cells in the table below: Papa Johns Pizza (NASDAQ:PZZA) opened its first store in Suzhou, China. The

Country U.S. Malaysia Brazil Norway Currency BigMac Price in Local Currency Dollar 4.89 Ringgit 13.50 Real 48.90 Krone Actual Exchange Rate (Foreign Currency per S) 1.00 3.60 2.90 Local Big Mac Implied PPP of Over/Under Price in Dollars the U.S Dollar Valuation Against the USS 2.111 1.554 56, 8% -4.83% 4.655 10.00 +25.0%

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