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The multinational company Hewlett Packard (HP) in the United States exports printers in Brazil, whose currency, the real (R $) is traded at R $
The multinational company Hewlett Packard (HP) in the United States exports printers in Brazil, whose currency, the real (R $) is traded at R $ 3.40 / US $. The Exports to Brazil amount to 50,000 printers per year and are equivalent at $ 200 per unit. There is a rumor that the real will be devalued by Brazilian government at R $ 4.00 / US $ within two weeks. In case the devaluation take place, the real is expected to remain unchanged for another decade. HP accepts this prediction and faces a dilemma product pricing:
(1) maintain the same real value and agree to sell the printers for less dollars, in which case the volume is expected to increase to 10% per year for four years. Costs do not change. the, (2) to maintain the same value of the dollar, increasing the price in real terms, to be compensated by the devaluation, where the volume will increase by only 4% per year for four years, starting from the lowest initial base of 40,000 units. Costs do not change
The weighted average cost of the company is 12% .. Direct costs in the US account for 60% of the sale price. At the end of four years the company patent expires and will no longer be exported to Brazil. Given these considerations, what pricing policy do you propose for HP? Justify your answer.
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