Chapter 1, Problem 33QA

Orbital Communications has operating plants in over 100 countries. It also keeps funds for transaction purposes in many foreign countries. Assume that in 2010 it held 100,000 kronas increased 6 percent aganist the dollar. What it the value of the holdings based on U.S. dollars, at the end of the year.

After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be $1.33 per pound, and the pound is expected to depreciate 3% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 8% a year indefinitely. The parent U.S. corporation owns 9 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 12% for the subsidiary. Do not round intermediate calculations. Round your answer to the nearest dollar.