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 655,000 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$) $4,490 35% Brazilian Subsidiary (R$) R$6,340 25% R$1.7815/$ German Subsidiary (€) €4,460 40% €0.7013/$ 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 22% against the U.S. dollar? c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 22% against the U.S. dollar? Chinese Subsidiary (Y) ¥2,560 30% ¥7.8326/$ O
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 655,000 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$) $4,490 35% Brazilian Subsidiary (R$) R$6,340 25% R$1.7815/$ German Subsidiary (€) €4,460 40% €0.7013/$ 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 22% against the U.S. dollar? c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 22% against the U.S. dollar? Chinese Subsidiary (Y) ¥2,560 30% ¥7.8326/$ O
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Need all three
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 655,000 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$)
$4,490
35%
Brazilian
Subsidiary
(R$)
R$6,340
25%
R$1.7815/$
German
Subsidiary
(€)
€4,460
40%
€0.7013/$
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 22% against the U.S. dollar?
c. What would be the impact on Americo's consolidated EPS if all foreign currencies were to depreciate 22% against the U.S. dollar?
Chinese
Subsidiary
(¥)
¥2,560
30%
¥7.8326/$
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Given Information
VIEWStep 2: Computation of Americo's consolidated Earnings and Consolidated EPS
VIEWStep 3: Computation the impact on EPS if all foreign currency appreciate 20% against US$
VIEWStep 4: Computation the impact on EPS if all foreign currency depreciated 20% against US$
VIEWSolution
VIEW
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education