a. f. KT Televisions, a US firm, has a Chinese subsidiary that manufactures and sells TVs in China. The main input is priced in USD (USD100/unit) b. All other costs are in CNY (Fixed cost=CNY4M, Variable cost= CNY300/unit). C. Depreciation = CNY1.2M d. So = CNY 6/USD e. Expects to sell 5,000 TVs this year at CNY2,000 each. Tax rate=30%; assuming tax credits are available for immediate use if losses occur A: What are the operating cash flows in CNY? What are the operating cash flows in USD? B: How many unit KT Televisions needs to sell to break-even in operating cash flows in dollars? C: What are the operating cash flows in dollars now? D: If the spot rate reduces to CNY5/USD, KT would like to pass all benefits to its client by reducing the selling price. What would be the new selling price that would maintain KTs profit (operating cash flows in dollars) in Part (c) and would pass all benefits to its client at the same time? E:If the spot rate increases to CNY7/USD, KT would like maximize its profits (operating cash flows in dollars) by changing the selling price and variable cost in CNY (not including the main input) but its actions are restricted by the following constraints: i. Selling price cannot increase by more than 20% from the original selling price; ii. Variable unit cost in CNY (not including the main input) can only be between 90% and 110% of the original cost; iii. Units sold will reduce at the same rate as selling price increases. For example, units sold will reduce by 10% if selling price increases by 10%. Please fill out the values of the following three variables that would maximise KT's profits (operating cash flows in dollars). New Selling Price per unit (1 mark) New Variable Cost in CNY (Not including the main (1 mark) input) per unit New Unit Sold (1 mark) a. f. KT Televisions, a US firm, has a Chinese subsidiary that manufactures and sells TVs in China. The main input is priced in USD (USD100/unit) b. All other costs are in CNY (Fixed cost=CNY4M, Variable cost= CNY300/unit). C. Depreciation = CNY1.2M d. So = CNY 6/USD e. Expects to sell 5,000 TVs this year at CNY2,000 each. Tax rate=30%; assuming tax credits are available for immediate use if losses occur A: What are the operating cash flows in CNY? What are the operating cash flows in USD? B: How many unit KT Televisions needs to sell to break-even in operating cash flows in dollars? C: What are the operating cash flows in dollars now? D: If the spot rate reduces to CNY5/USD, KT would like to pass all benefits to its client by reducing the selling price. What would be the new selling price that would maintain KTs profit (operating cash flows in dollars) in Part (c) and would pass all benefits to its client at the same time? E:If the spot rate increases to CNY7/USD, KT would like maximize its profits (operating cash flows in dollars) by changing the selling price and variable cost in CNY (not including the main input) but its actions are restricted by the following constraints: i. Selling price cannot increase by more than 20% from the original selling price; ii. Variable unit cost in CNY (not including the main input) can only be between 90% and 110% of the original cost; iii. Units sold will reduce at the same rate as selling price increases. For example, units sold will reduce by 10% if selling price increases by 10%. Please fill out the values of the following three variables that would maximise KT's profits (operating cash flows in dollars). New Selling Price per unit (1 mark) New Variable Cost in CNY (Not including the main (1 mark) input) per unit New Unit Sold (1 mark)
