Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-2 sports cars for the next three years. The company will build the cars in Japan and ship them to the United States for sale. The current indirect rate is V96.7408 per dollar. The anticipated inflation rate for parts and labor in Japan is 2.4% over the next three years, and the anticipated overall inflation rate for Japan is 3.4% over the next three years. The expected overall inflation rate in the United States is 4.4% over the next three years. (The stated rates are on an annual basis.) If Copy-Cat plans to sell 800 cars a year at an initial price of $42.000 and the cost of production is 4,016.500, what is the annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Is this profit rising or falling each year? Why? What is the expected sales revenue per car in dollars for Copy-Cat in year 17 (Round to the nearest cent.)

Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-2 sports cars for the next three years. The company will build the cars in Japan and ship them to the United States for sale. The current indirect rate is V96.7408 per dollar. The anticipated inflation rate for parts and labor in Japan is 2.4% over the next three years, and the anticipated overall inflation rate for Japan is 3.4% over the next three years. The expected overall inflation rate in the United States is 4.4% over the next three years. (The stated rates are on an annual basis.) If Copy-Cat plans to sell 800 cars a year at an initial price of $42.000 and the cost of production is 4,016.500, what is the annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Is this profit rising or falling each year? Why? What is the expected sales revenue per car in dollars for Copy-Cat in year 17 (Round to the nearest cent.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter21: Risk Management

Section: Chapter Questions

Problem 3P

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