Perth International anticipates a 4.68 per cent increase in the year-one income of its subsidiaries in year-two. It has information that the current 5.22 per cent, 8.43 per cent, 13.74 per cent and 11.63 per cent nominal interest rate in Australia, China, India and Malaysia,
Perth International anticipates a 4.68 per cent increase in the year-one income of its subsidiaries in year-two. It has information that the current 5.22 per cent, 8.43 per cent, 13.74 per cent and 11.63 per cent nominal interest rate in Australia, China, India and Malaysia,
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Perth International anticipates a 4.68 per cent
increase in the year-one income of its
subsidiaries in year-two. It has information that
the current 5.22 per cent, 8.43 per cent, 13.74
per cent and 11.63 per cent nominal interest rate
in Australia, China, India and Malaysia,
respectively, will remain the same in the next
three years. Due to foreign currency higher
nominal interest rate, subsidiaries will invest 21
per cent, 53 per cent and 39 per cent of their
year-two earnings in China, India and Malaysia,
respectively, for next year. Subsidiaries will
remit their remaining incomes (i.e., after
investment) to the Australian parent. Perth
International believes in the International Fisher
Effects with considering a 2.20 per cent real
interest in Australia, China, India and Malaysia to
calculate the expected foreign currency value
against the Australian dollar for year-two based
on the year-one exchange rates A$/CNY, A$/INR,
and A$/MYR.
What is the total Australian dollar (A$) cash flow
for year-two? (enter the whole number with no
sign or symbol)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3fc5a13a-d753-4870-bc1f-827499ea0655%2F2ff4da20-7943-4981-8aa3-e0df04bec285%2Fg6s7txq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Perth International anticipates a 4.68 per cent
increase in the year-one income of its
subsidiaries in year-two. It has information that
the current 5.22 per cent, 8.43 per cent, 13.74
per cent and 11.63 per cent nominal interest rate
in Australia, China, India and Malaysia,
respectively, will remain the same in the next
three years. Due to foreign currency higher
nominal interest rate, subsidiaries will invest 21
per cent, 53 per cent and 39 per cent of their
year-two earnings in China, India and Malaysia,
respectively, for next year. Subsidiaries will
remit their remaining incomes (i.e., after
investment) to the Australian parent. Perth
International believes in the International Fisher
Effects with considering a 2.20 per cent real
interest in Australia, China, India and Malaysia to
calculate the expected foreign currency value
against the Australian dollar for year-two based
on the year-one exchange rates A$/CNY, A$/INR,
and A$/MYR.
What is the total Australian dollar (A$) cash flow
for year-two? (enter the whole number with no
sign or symbol)
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