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International Trade Finance

Assignment-1
Evaluation of Viability of the Transaction of Export of “Mobile Evaluation of Viability of the Transaction of Export of “Mobile Cases” To India from China

Submitted To - Submitted By- Fernando Montero Sandeep Singh Buttar (000312846) Amanpreet Kaur (000313147) Naina Sharma (000313675) Dilreez Kaur Ghuman (000312831) Lakhwinder Singh Uppal (000317130)

MOHAWK COLLEGE

Index

1- Introduction…………………………………………………………………..3 2- Calculation of Export Cost……………………………………………….3 2.1 Export Costing Sheet……………………………………………….4 3.Pricing Strategy……………………………………………………………….5 4.Evaluating The Viability Of Transection…………………………….6 5.Conclusion………………………………………………………………………7 6. References…………………………………………………………………….8

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ASSIGNMENT#1
Introduction:
Global accessory factory, China was approached by an importing company from India(Fancy accessories shop) to buy its specific products i.e. Mobile phone cases. Importer may realized the enhancing demand of as such cases in India, as India has huge market for expensive cell phones. Mobile phone case is complementary good to cell phones and this will allow importer to sell these cases in large amount at low prices. On the other hand Global accessory company's main objective is to maximize its sales. This means objectives of both companies complement each other. Although both companies' objectives complements each other but still there are many things to consider before the completion of project. The evaluation of transaction is very important to do. Therefore to export this product, Global accessory factory would evaluate this export project. They will definitely forecast project's viability that whether it is profitable or not, by comparing its production cost and price (with respect to pricing strategy). Global company will go through following steps to evaluate this export transaction. Step 1

Calculating export cost:
For this, Chinese company at first calculates the export cost by considering the fact that Indian importer uses DDP incoterms for transactions. Incoterms would tell the responsibilities that would be share by seller and buyer regarding the payment (that would come out up to the delivery of goods) DDP incoterms-(Delivery Duty Paid) which means responsibility for the rise of carrying out custom formalities, customs duties, taxes would rely upon exporter. Fancy Accessory shop may uses DDP incoterm to keep himself away from custom departments. By considering DDP incoterms of Importer, Exporter calculates Export Cost and construct the following Export costing sheet. Export Costing Sheet

Date: March 18, 2013 Customer: Fancy Accessory Shop, Palika bazar, New Delhi, IndiaProduct: “Mobile phone cases”Destination: India| Manufacturing cost or Production cost|
1. Product cost:( 2CNY per unit cost ( A) ) CNY2000| 2. Target markup: 10% of (A) 200| 3. Overseas agent commission: 6% of (A) 120| 4. Financing cost of production: 7% of (A) 140| 5. Export packing charges 200| 6. Labeling and marking for 1000 units...
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