A set of industrial machineries can be built in USA, Germany, England, or Japan and shipped to Country-W in Latin America for integration in an oil refinery. Quotes are received from contractors and convert to the U.S. dollar for estimation. You may use current spot exchange rates from the web link: ) or use the rates below.

According to the contract, payment is transacted between the two parties on the day the industrial machineries reach the port of entry of Country W. The exchange rate for the scheduled arrival is, however, different from that listed by the table and is shown as a relative change to the table.

The U.S. estimate for the industrial machineries fabrication cost is $350 million. Transport from US to Country W is $115,000. Assume order was place one year earlier.

	Germany (Euro)	England (UK )	Japan (Jap. Yen)
Ratio of subcontract bid to USA estimate	0.993	1.007	1.005
Ratio of Transportation cost to USA estimate (transport to Country W, from country -)	1.03	1.07	1.26
Exchange rate on arrival (I USD =)	0.74	0.61	102.32
Inflation	0.85%	2.0%	01.613%

7.a) In which country should the machines be built, what is that cost in USA currency?

7.b) Who is the next-lowest country? What are dollar differences?

7.c) What other non-numerical judgment enter the decision process (such as quality)?

Hints

Country	Quote in U.S. $ (i)	Transportation cost (ii)	Exchange rate /Inflation (iii)	Expected Cost at Arrival in U.S. $ (i) +(ii) + (iii)
USA	$350 m	115,000	1.0085
Germany	$350 m 0.993=X	115,0000.993=Y	1.0085(X+Y)	___________
England	$350 m 1.007			___________
Japan	$350 m 1.005			___________

Hint Inflation cost will be calculated by multiplying the inflation rate by on sum of cost of product (e.g., X for Germany) and transportation cost (e.g., Y for Germany)

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Quote for Germany = 350* 0.993=$ 347.55

Transportation cost for Germany = 115,000*0.993=$ 114195

Total cost (347,550,000+ 118,450 )*1.0085= $ 350,401,761

The total cost for Germany is $ 350,401,761. You need to do the same things for other countries and finally pick the country with the lowest cost.