Question
I have a mock project for work that I'm struggling with and could really use your help. Note, attached pic has the table. I'm not
I have a mock project for work that I'm struggling with and could really use your help. Note, attached pic has the table. I'm not sure where to post this on the internet...but here we are, thanks for any help/guidance. Also, time is of the essence:
I need your help in preparing a study to localize our luxury product Alpha to the country of Rica. Rica's currency (abbreviated RIC) has weakened considerably in the past year against the U.S. dollar (USD) causing the profit translation of our revenue from our Rica sold units to degrade significantly. The leadership team has requested that we find a way to mitigate this currency volatility. One way is to better match the currency of our costs to the currency of our revenue. As our sales in Rica constitute a larger mix of the total global sales of our multi-vehicle portfolio going forward, localizing Alpha and creating some RIC cost exposure may help balance our overall currency portfolio and minimize the profit impact of volatile currency movements.
Your analysis should provide a profit impact sensitivity analysis using the range of RIC:USD provided below.
- Your profit impact analysis should focus on a decision analysis for the localization alternative. The U.S. sourcing location is in our present Business Plan. Provide an incremental view to our Business Plan shown in $ Millions.
- The localization alternative will have no impact on our sales revenue, so all the data that I have sent over is cost related. There is no need to include revenue in the incremental decision analysis.
- Given the tight timing on this request, assume a One Period Analysis for this study (i.e., calculate the profit impact for one year only). At a later date, with better data and an aligned cost of capital, we will analyze the entire fiveyear product cycle.
- Bryan from the Corporate Economics team suggested that we study a three-point range for RIC:USD (5:1, 6:1, and 7:1).
As you will see, there are trade-offs with the localization alternative. Let me know your recommendation based on the available data. And let me know other risks or concerns (financial and non-financial).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started