Chapter 15, Problem 13QA

Consider a US-based MNC with a wholly owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct?  Group of answer choices a. The cash flow in euros could be altered due a change in the firm's competitive position in the marketplace. b. A given operating cash flow in euros will be converted to a higher US dollar cash flow. c. Both A and B d. None of the above

MNC Cash Flows and Exchange Rate Risk Asheville Co. has a subsidiary in Mexico that develops software for its parent. It rents a large facility in Mexico and hires many people in Mexico to work in the facility. Asheville Co. has no other international business. All operations are presently funded by Asheville’s parent. All the software is sold to U.S. firms by Asheville’s parent and invoiced in U.S. dollars.If the Mexican peso appreciates against the dollar, does this have a favorable effect, unfavorable effect, or no effect on Asheville’s value?

Please answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it     A U.S. company has a subsidiary in the U.K., acquired at a cost in excess of the subsidiary’s book value. The U.S. dollar has steadily strengthened with respect to the pound sterling. The subsidiary’s functional currency is the pound. Which statement is true concerning the effects of consolidation eliminations (R) and (O), recognizing beginning-of-year revaluations and write-offs for the current year? Select one: a. Additional net losses will be reported in other comprehensive income. b. Additional net gains will be reported in net income. c. Additional net losses will be reported in net income. d. Additional net gains will be reported in other comprehensive income.