Company A exports crane equipment to several Chinese dock facilities. Sales are currently 10,000 per year at teh yuan equivalent of $24,000 each. The Chinese yuan has been trading at yuan8.20/$, but a Hong Kong advisory service predicts the yuan will drop next week to Yuan9.00/$, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Murray Exports faces a pricing decision in the face of the impending devaluation. It may either 1) maintain the same yuan price and in effect sell for fewer dollars, in which case Chinese volumes Chinese volume will not change; or 2) maintain the same dollare price, raise the yuan price in China to offset the devalutaion, and experience a 10% drop in unit volume. Direct costs are 75% of the U.S sales price.

A. What would be the short-run (one-year) impact of each prcing strategy?

B. Which do you reccomend?