a. What was Blundell Biotech's consolidated profits in U.S. dollars in 2013 and 2014? ese data to answer the following questions. b. If the same exchange rates were used for both years-which is often called a "constant currency basis-what was the change in corporate earnings on a constant currency basis? c. Using the results of the constant currency analysis in part (b), is it possible to separate Blundell's growth in earnings between local currency earnings and foreign exchange rate impacts on a consolidated basis? by currency pairs, are

a. What was Blundell Biotech's consolidated profits in U.S. dollars in 2013 and 2014? ese data to answer the following questions. b. If the same exchange rates were used for both years-which is often called a "constant currency basis-what was the change in corporate earnings on a constant currency basis? c. Using the results of the constant currency analysis in part (b), is it possible to separate Blundell's growth in earnings between local currency earnings and foreign exchange rate impacts on a consolidated basis? by currency pairs, are

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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Blundell Biotech. Blundell Biotech is a U.S.-based biotechnology company with operations and earnings in a number of foreign countries.
The company's profits by subsidiary, in local currency (in millions) along with the average exchange rate for each year, by currency pairs, are
shown in the table for 2013 and 2014. Use these data to answer the following questions.
a. What was Blundell Biotech's consolidated profits in U.S. dollars in 2013 and 2014?
b. If the same exchange rates were used for both years-which is often called a "constant currency basis-what was the change in corporate
earnings on a constant currency basis?
c. Using the results of the constant currency analysis in part (b), is it possible to separate Blundell's growth in earnings between local currency
earnings and foreign exchange rate impacts on a consolidated basis?

(Click on the icon to import the table into a spreadsheet.)
(a)
(b)
Net Income
2013
2014
Exchange Rate
2013
2014
Japanese
Subsidiary
JPY
1,507
1,463
JPY = 1 USD
97.49
105.81
British
Subsidiary
GBP
94.33
106.13
USD = 1 GBP
1.5298
1.616
European
Subsidiary
EUR
205.52
217.02
USD = 1 EUR
1.3532
1.3845
Print
Chinese
Subsidiary
CNY
Done
167.07
203.67
CNY = 1 USD
6.2108
6.2235
Russian
Subsidiary
RUB
118.31
108.57
RUB= 1 USD
31.82
38.58
United States
Subsidiary
USD
353.38
386.81
USD
1
1

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Step 1: Introduce the concept of exchange rate.

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Step 2: Part a. Calculate Blundell Biotech's consolidated profits in US dollars in 2013 and 2014.

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Step 3: Part b. Calculate Blundell Biotech's consolidated profits in US dollars using same exchange rate.

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Step 4: Part c. Calculate difference in change of consolidated profit between constant and annual basis.

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