Hurte-Paroxysm Products, Inc. (HP) of the United States exports computer printers to Brazil, whose currency, the reals (symbol R$) havebeen trading at R$3.40/US$. Exports to Brazil are currently 50,000 printers per year at the reals equivalent of $200 each. A strong rumor exists that the reals will be devalued to R$4.00/$ within two weeks by the Brazilian government. Should the devaluation take place, the exchange rate isexpected to remain unchanged for the foreseeable future. Based on this forecast, HP Products may either (1) maintain the same realprice and sell for fewer dollars, in which case Brazilian volume will not change, or (2) maintain the same dollar price, raise the realprice in Brazil to compensate for the devaluation, and experience a 20% drop in volume. Direct costs in the U. S. are 60% of the U. S. sales price. Required:
a. What would be the short-run (one-year) impact of each pricing strategy?
b. Which do you recommend?

If HP maintains the same real price and same unit volume, what will be the firm's gross profits?