What will happen to its translation exposure if it uses the funds to pay a dividend to its parent? Zapata Auto Parts, the Mexican affiliate of American Diversified, Inc., had the following balance sheet on January 1: Assets (Mex$ Millions) Liabilities (Mex$ Millions) Cash, marketable securities Mex$1,000 Current liabilities Mex$47,000 Accounts receivable 50,000 Long-term debt […]
Suppose the exchange rate on December 31 is Mex$12,000. What will be Zapata’s translation loss for the year? Zapata Auto Parts, the Mexican affiliate of American Diversified, Inc., had the following balance sheet on January 1: Assets (Mex$ Millions) Liabilities (Mex$ Millions) Cash, marketable securities Mex$1,000 Current liabilities Mex$47,000 Accounts receivable 50,000 Long-term debt 12,000
What is Zapata’s FASB-52 peso translation exposure on January 1? Zapata Auto Parts, the Mexican affiliate of American Diversified, Inc., had the following balance sheet on January 1: Assets (Mex$ Millions) Liabilities (Mex$ Millions) Cash, marketable securities Mex$1,000 Current liabilities Mex$47,000 Accounts receivable 50,000 Long-term debt 12,000 Inventory 32,000 Equity 135,000 Net fixed assets 111,000
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What is Rolls-Royce’s gain or loss, in pound terms, on its dollar transaction exposure? Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies. Suppose it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also has borrowed $600 million. The current spot rate
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What is Rolls-Royce’s dollar transaction exposure in dollar terms? Rolls-Royce, the British jet engine manufacturer, sells engines to U.S. airlines and buys parts from U.S. companies. Suppose it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also has borrowed $600 million. The current spot rate is $1.5128/£. a. What is
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If the dollar is the functional currency, where does Bell U.K.’s translation gain or loss show up on Bell U.S.’s financial statements? 1. Suppose that at the start and at the end of the year, Bell U.K., the British subsidiary of Bell U.S., has current assets of £1 million, fixed assets of £2 million, and
What is Bell U.K.’s translation exposure under the current/noncurrent, monetary/nonmonetary, temporal, and current rate methods? 1. Suppose that at the start and at the end of the year, Bell U.K., the British subsidiary of Bell U.S., has current assets of £1 million, fixed assets of £2 million, and current liabilities of £1 million. Bell has
Questions 1. What is translation exposure? Transaction exposure? 2. What are the basic translation methods? How do they differ? 3. What factors affect a company’s translation exposure? What can the company do to affect its degree of translation exposure? 4. What alternative hedging transactions are available to a company seeking to hedge the translation exposure
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Questions 1. What is translation exposure? Transaction exposure? 2. What are the basic translation methods? How do they differ? 3. What factors affect a company’s translation exposure? What can the company do to affect its degree of translation exposure? 4. What alternative hedging transactions are available to a company seeking to hedge the translation exposure
Questions 1. What is translation exposure? Transaction exposure? 2. What are the basic translation methods? How do they differ? 3. What factors affect a company’s translation exposure? What can the company do to affect its degree of translation exposure? 4. What alternative hedging transactions are available to a company seeking to hedge the translation exposure