U.S. Division Operating income Total assets Norwegian Division 6,840,000 kroner 72,000,000 kroner ? $7,700,000 ROI 15.00% ? Both investments were made on December 31, 2016. The exchange rate at the time of Seaside's investment in Norway on December 31, 2016, was 9 kroner = $1. During 2017, the Norwegian kroner decreased steadily in value so that the exchange rate on December 31, 2017, is 10 kroner = $1. The average exchange rate dur- ing 2017 is [(9 + 10) ÷ 2] = 9.5 kroner = $1. 1. a. Calculate the U.S. division's operating income for 2017. b. Calculate the Norwegian division's ROI for 2017 in kroner. 2. Top management wants to know which division earned a better ROI in 2017. What would you tell them? Explain your answer. 3. Which division do you think had the better RI performance? Explain your answer. The required rate of return on investment (calculated in U.S. dollars) is 11%. Required
U.S. Division Operating income Total assets Norwegian Division 6,840,000 kroner 72,000,000 kroner ? $7,700,000 ROI 15.00% ? Both investments were made on December 31, 2016. The exchange rate at the time of Seaside's investment in Norway on December 31, 2016, was 9 kroner = $1. During 2017, the Norwegian kroner decreased steadily in value so that the exchange rate on December 31, 2017, is 10 kroner = $1. The average exchange rate dur- ing 2017 is [(9 + 10) ÷ 2] = 9.5 kroner = $1. 1. a. Calculate the U.S. division's operating income for 2017. b. Calculate the Norwegian division's ROI for 2017 in kroner. 2. Top management wants to know which division earned a better ROI in 2017. What would you tell them? Explain your answer. 3. Which division do you think had the better RI performance? Explain your answer. The required rate of return on investment (calculated in U.S. dollars) is 11%. Required
Chapter10: Measuring Exposure To Exchange Rate Fluctuations
Section: Chapter Questions
Problem 1IEE
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Multinational performance measurement,
information is available for 2017; ROI is calculated as operating income divided by total assets:
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