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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,

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,

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 3CQQ
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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)
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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