2. (20 points) An American company is considering relocating their Wisconsin facility to South Korea....
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2. (20 points) An American company is considering relocating their Wisconsin facility to South Korea. The current exchange rate is 1 U.S. dollar (USD) to 1100 South Korean Won (KRW). The current wage rate in South Korea is 8000 KRW per hour, and the U.S. wage rate is $15/hour. If the U.S. facility is known to be three times as productive as the South Korean facility.
a. What is the relative wage rate (in dollars, rounded to the nearest cent) of operating in South Korea, before taking productivity differences into account?
b. What is the relative wage rate (in dollars, rounded to the nearest cent) of operating in South Korea, after taking productivity differences into account?
c. Suppose that the top management has decided to move the facility to South Korea, irrespective of the above calculations (due to assurances that the South Koreans would increase their productivity). If South Koreas current productivity is 100 units per hour, to which value should it increase at minimum, so that moving the facility is a worthy decision? (Hint Find productivity is required by the South Koreans to ensure that the relative wage rate is equal to $15/hr)
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