Hurte Paroxysm Products, Inc. (A). Hurte-Paroxysm Products, Inc. (HP) of the United States, exports computer...
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Hurte Paroxysm Products, Inc. (A). Hurte-Paroxysm Products, Inc. (HP) of the United States, exports computer printers to Brazil, whose currency, the real (R$) has been trading at R$3.30/USS. Exports to Brazil are currently 50,000 printers per year at the real equivalent of $250 each. A strong rumor exists that the real will be devalued to R53 80/5 within two weeks by the Brazilian government. Should the devaluation take place, the real is expected to remain unchanged for another decade. Accepting this forecast as given, HP faces a pricing decision that must be made before any actual devaluation: HP may either (1) maintain the same real price and in effect sell for fewer dollars, in which case Brazilian volume will not change or (2) maintain the same dollar price, raise the real price in Brazil to compensate for the devaluation, and experience a 20% drop in volume. Direct costs in the United States are 60% of the US sales price. a. What would be the short run (one-year) impact of each pricing strategy? b. Which do you recommend? a. I HP maintains the same real price and same unit volume, what will be the firm's gross profits? (Round to the nearest dolar) esources Enter your answer in the answer box and then click Check
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