Americo's Earnings and the Fall of the Dollar. Americo is a U.S.-based multinational manufacturing firm with wholly-owned subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the United States. Americo is traded on the NASDAQ. Americo currently has 650,000 shares outstanding. The basic operating characteristics of the various business units is as follows: (Click on the icon to import the table into a spreadsheet.) Business Performance (000s) Earnings before taxes (EBT) Corporate income tax rate Average exchange rate for the period U.S. Parent (US$) $4,500 35% Brazilian Subsidiary (R$) R$6,250 25% R$1.8/$ Americo must pay corporate income tax in each country in which it currently has operations. a. After deducting taxes in each country, what are Americo's consolidated earnings and consolidated earnings per share in U.S. dollars? The dollar has experienced significant swings in value against most of the world's currencies in recent years. b. What would be the impact on Americo's consolidated EPS if all foreign currencies were to appreciate 20% against the U.S. dollar? c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 20% against the U.S. dollar? German Subsidiary (€) €4,500 40% €0.7018/$ Chinese Subsidiary (1) ¥2,500 30% ¥7.75/$
Americo's Earnings and the Fall of the Dollar. Americo is a U.S.-based multinational manufacturing firm with wholly-owned subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the United States. Americo is traded on the NASDAQ. Americo currently has 650,000 shares outstanding. The basic operating characteristics of the various business units is as follows: (Click on the icon to import the table into a spreadsheet.) Business Performance (000s) Earnings before taxes (EBT) Corporate income tax rate Average exchange rate for the period U.S. Parent (US$) $4,500 35% Brazilian Subsidiary (R$) R$6,250 25% R$1.8/$ Americo must pay corporate income tax in each country in which it currently has operations. a. After deducting taxes in each country, what are Americo's consolidated earnings and consolidated earnings per share in U.S. dollars? The dollar has experienced significant swings in value against most of the world's currencies in recent years. b. What would be the impact on Americo's consolidated EPS if all foreign currencies were to appreciate 20% against the U.S. dollar? c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 20% against the U.S. dollar? German Subsidiary (€) €4,500 40% €0.7018/$ Chinese Subsidiary (1) ¥2,500 30% ¥7.75/$
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Americo's Earnings and the Fall of the Dollar. Americo is a U.S.-based multinational manufacturing firm with wholly-owned subsidiaries in Brazil, Germany, and China, in addition to domestic
operations in the United States. Americo is traded on the NASDAQ. Americo currently has 650,000 shares outstanding. The basic operating characteristics of the various business units is as follows:
(Click on the icon to import the table into a spreadsheet.)
Business Performance (000s)
Earnings before taxes (EBT)
Corporate income tax rate
Average exchange rate for the period
U.S. Parent
(US$)
$4,500
35%
Brazilian
Subsidiary
(R$)
R$6,250
25%
R$1.8/$
Americo must pay corporate income tax in each country in which it currently has operations.
a. After deducting taxes in each country, what are Americo's consolidated earnings and consolidated earnings per share in U.S. dollars?
The dollar has experienced significant swings in value against most of the world's currencies in recent years.
b. What would be the impact on Americo's consolidated EPS if all foreign currencies were to appreciate 20% against the U.S. dollar?
c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 20% against the U.S. dollar?
German
Subsidiary
(€)
€4,500
40%
€0.7018/$
Chinese
Subsidiary
¥2,500
30%
¥7.75/$
C
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