Dell Inc. exports computers to Brazil, whose currency, R$ (reais), has been trading at R$4.00/US$. Dell…

Dell Inc. exports computers to Brazil,
whose currency, R$ (reais), has been trading at
R$4.00/US$. Dell currently exports
40,000 computers per year at reais equivalent of $400
each. A strong rumor exists that reais
will be devalued to R$4.50/US$ within a month by the
Brazilian government. If the
devaluation takes place, the reais is expected to stay at that
level
for a decade. Accepting the forecast
as given, Dell faces a pricing decision which must be
made before any actual devaluation.
Dell may either (1) maintain the same reais price and in
effect sell for fewer dollars in which
case the export quantity will remain the same, or
(2) maintain the same dollar price,
raise the reais price in Brazil to compensate for the
devaluation, and experience a 15% drop
in the export volume. The direct cost of
manufacturing computers in the U.S. is
65% of the U.S. sales price.

What is the current reais price of the exports to Brazilian
customers?
What will be dollar revenue to Dell after devaluation if Dell
does not change the current reais price to Brazilian
customers?
What will be the dollar revenue to Dell after devaluation if
Dell does not change the current dollar price of the exports?
If you are the advisor, what would be your recommendation to
Dell? Explain.