10. Offshoring (C-advanced). Referring to the information provided in problems 8 and 9, inflation in the Philippines is expected to run at an annual rate of 8 percent over the next five years while the peso, currently trading at PHP 50 = €1, is expected to depreciate at the rate of 5 percent against the euro over the same period.

a. Does this confirm your recommendation reached in Problem 9?

b. Cardiex fears that labor wage inflation in excess of the 8 percent inflation already projected would jeopardize the economic logic of offshoring (labor costs account for 50 percent of cost of goods sold). What is the maximum increase in labor wages that would keep the offshoring plan worthwhile?

c. Howwould the imposition of an 8.5 percent ad valorem tariff by the European Union on the importation of assembled defibrillators from the Philippines change your recommendation?