3. Newport Lifts (B). Assume the same facts as in Newport Lifts (A). Additionally, financial manage- ment
Question:
3. Newport Lifts (B). Assume the same facts as in Newport Lifts (A). Additionally, financial manage- ment 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, Newport Lift's patent expires and it will no longer export to China. After the yuan is deval- ued to Yuan9.20/$, no further devaluations are expected. If Newport Lifts 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, Newport will stop exporting to China. Newport's weighted average cost of capital is 10%. Given these considerations, what should be Newport's pricing policy?
Step by Step Answer:
Fundamentals Of Multinational Finance
ISBN: 9780321541642
3rd Edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman