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Consider a car dealer in China. In January 2011, it ordered shipments of BMWs from Germany at 650,000 each and Cadillac SUVs at $40,000 each from the United States.
By July 2011, the Chinese Yuan had depreciated by 3% from 8.93 Yuan against the Euro and appreciated by 2% from 6.58 Yuan against the U.S. dollar.
a) For purposes of pricing, what is the relevant cost of the BMWs?
b) For purposes of pricing, what is the relevant cost of the Cadillacs?
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