Part $1$ of $3$

Points: $0$ of $1$

Hurte$-$Paroxysm Products, Inc. $($A$).$ Hurte$-$Paroxysm Products, Inc. $($HP$)$ of the United States, exports computer printers to Brazil, whose currency, the reais $($BRL$)$ has been trading at BRL$3\mathrm{.}20=$ USD$1\mathrm{.}00.$ Exports to Brazil are currently $50,000$ printers per year at the reais$-$equivalent of $$240$ each. A rumor exists that the reais will be devalued against the dollar to BRL$3\mathrm{.}90$ within two weeks by the Brazilian government. Should the devaluation take place, the reais is expected to remain unchanged for another decade.

Accepting this forecast as given, HP faces a pricing decision that must be made before any actual devaluation: HP may either $(1)$ maintain the same reais price and, in effect, sell for fewer dollars, in which case Brazilian volume will not change, or $(2)$ maintain the same dollar price, raise the reais price in Brazil to compensate for the devaluation, and experience a $20\%$ drop in volume. Direct costs in the United States are $60\%$ of the U$.$S$.$ sales price.

a$.$ What would be the short$-$run $($one$-$year$)$ impact of each pricing strategy?

b$.$ Which do you recommend?

a$.$ If HP maintains the same reais price and same unit volume, what will be the firm's gross profits?

$($Round to the nearest dollar.$)$