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    Multinational companies foreign operations and pricing

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    IBM in terms of currency denomination, how does the firm prices its revenues and costs. Also, I am not clear on this, for MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. What do you think would be the effect of increases/decreases in the dollar's exchange value on the firm's profitability? Please explain this to me.

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    If the firms has operations in various countries, the revenues and costs are incurred in the local currency and accordingly priced. The costing would depend on the environment in the local country. Many firms are setting up plants in China due to lower costs there. Similarly the selling price is again dependant on the purchasing power in the local country, the competition there. In terms of currency denomination, the revenues and ...

    Solution Summary

    The solution explains how a multinational firm prices its revenues and costs given the exchange differences