Impact of Translation Exposure on Stock Valuation Spencer Co., a U.S. firm, has a large subsidiary in Singapore that generates a large amount of the parent’s earnings. Spencer’s stock is usually valued at approximately 16 times its reported earnings per share. The earnings generated by the Singapore subsidiary in this period are the same as those in the previous period. The Singapore dollar has depreciated substantially against the U.S. dollar during this period. None of the earnings generated by the Singapore subsidiary in this period will be remitted to the U.S. parent at this time. How will the stock price of Spencer be affected (if at all) when the earnings are reported at the end of this period? Explain.
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.