Homework A Chapters 1 To

GET COVER PAGE FROM SYLLABUS AND
INCLUDE YOUR INFORMATION.

CHAPTER 1 ASSIGNMENT TEMPLATE:
Question 6: What is the theory of comparative advantage?
The comparative advantage theory refers to advantage of enjoying fre trade, perfect competition, no
uncertanty, costless information, and no government interference in a modern world. In addition, the
theory also refers to that countries should focus on producing more of the goods they have to forgoe less
of other products.
Question 7: Name 4 key limitations to the theory of comparative advantage.
Countires do not end up focusing on products that could be most efficiently produced by that country.
Second, the government focus in competitive advantage due to political and economic reasons. Third,
the government might imposed high tariffs and restrictions. Fourth, the process by which the trade
terms are set in the the theory of comparative adavantage are different from the tradional trade theory.
Americo Industries - 2010
Problems 6 through 10 are based on Americo Industries. Americo is a U.S.-based multinational manufacturing firm, with wholly owned subs
addition to domestic operations in the United States. Americo is traded on the NADSAQ. Americo currently has 650,000 shares outstanding.
various business units is as follows:
U.S. Parent Brazilian

Company Subsidiary
Business Performance (000s, loccal currency) (US$) (reais, R$)
Earnings before taxes (EBT) $4,500 R$6,250
Corporate income tax rate 35% 25%
Average exchange rate for the period ------ R$1.80/$
Problem 1.10 Americo Industries' Consolidate Earnings
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?
b. What proportion of Americo's consolidated earnings arise from each individual country?
c. What proportion of Americo's consolidated earnings arise from outside the United States?

Company Subsidiary
Business Performance (000s) (US$) (reais, R$)
Earnings before taxes, EBT (local currency) 4,500.00 6,250.00

Less corpora 35% (1,575.00) 25% (1,562.50)
Net profits of individual subsidiary 2,925.00 4,687.50
Avg exchange rate for the period (fc/$) ------ 1.8000

Net profits of individual subsidiary (US$) $ 2,925.00 $ 2,604.17
Consolidated profits (total across units) $ 9,602.22

Total diluted shares outstanding (000s) 650.00
a. Consolidated earnings per share (EPS) $ 14.77
b. Proportion of total profits originating

by country 30.5% 27.1%
c. Proportion of total profits originating

from outside the United States 69.5%
Problem 1.11 Americo's EPS Sensitivity to Exchange Rates (A)
Assume a major political crisis wracks Brazil, first affecting the value of the Brazilian reais and, subsequently, inducing an economic recessi
impact on Americo's consolidated EPS if the Brazilian reais were to fall in value to R$3.00/$, with all other earnings and exchange rates rem

Company Subsidiary

Less corpora 35% (1,575.00) 25% (1,562.50)


Baseline earnings per share (EPS) $ 14.77
Brazilian reais falls in value against the U.S. dollar

Company Subsidiary
Less corpora 35% (1,575.00) 25% (1,562.50)


"New" earnings per share (EPS) $ 13.17
EPS change from baseline: -10.8%
Problem 1.12 Americo's EPS Sensitivity to Exchange Rates (B)
Assume a major political crisis wracks Brazil, first affecting the value of the Brazilian reais and, subsequently, inducing an economic recessi
impact on Americo's consolidated EPS if, in addition to the fall in the value of the reais to R$3.00/$, earnings before taxes in Brazil fell as a

Company Subsidiary

Less corpora 35% (1,575.00) 25% (1,562.50)


Brazilian reais falls in value against the U.S. dollar and Americo's Brazilian sales decline

Company Subsidiary
Less corpora 35% (1,575.00) 25% (1,450.00)


Revised earnings per share (EPS) $ 13.00
Change in EPS from both changes: -12.0%
Problem 1.13 Americo's Earnings and the Fall of the Dollar
The U.S. dollar has experienced significant swings in value against most of the world's currencies in recent years.
a. What would be the impact on Americo’s consolidated EPS if all foreign currencies were to appreciate 20% against the U.S. do
b. What would be the impact on Americo’s consolidated EPS if all foreign currencies were to depreciate 20% against the U.S. do
Baseline exchange rate (fc/$) -----

Percent change (+ appreciation, - depreciation)
New exchange rate (fc/$)
Appreciation Case U.S. Parent

Company
Business Performance (000s) (US$)
Earnings before taxes, EBT (local currency) 4,500.00

Less corporate income taxes 35% (1,575.00) 25%
Net profits of individual subsidiary 2,925.00
Avg exchange rate for the period (fc/$) ------

Net profits of individual subsidiary (US$) $ 2,925.00

EPS if foreign currencies appreciate $ 16.83

Baseline exchange rate (fc/$) -----
Percent change (+ appreciation, - depreciation)
New exchange rate (fc/$)
Depreciation Case U.S. Parent

Company



EPS if foreign currencies depreciate $ 12.72
Problem 1.14 Americo's Earnings and Global Taxation
All MNEs attempt to minimize their global tax liabilities. Return to the original set of baseline assumptions and answer the follo
a. What is the total amount – in U.S. dollars – which Americo is paying across its global business in corporate income taxes?
b. What is Americo's effective tax rate (total taxes paid as a proportion of pre-tax profit)?
c. What would be the impact on Americo’s EPS and global effective tax rate if Germany instituted a corporate tax reduction to 2
to €5,000,000?
U.S. Parent
Company


Consoldiated earnings per share (EPS) $ 14.77
Tax payments by country in US dollars $ 1,575.00
a. Total global tax bill, US$ $ 5,104.66
b. What is Americo's effective tax rate?
EBT by country, US$ $ 4,500.00
Consolidated EBT $ 14,706.89

Total tax bill $ 5,104.66
Effective tax rate 34.7%
c. What would be the impact on Americo's EPS and global effective tax rate if Germany instituted a tax cut to 28% and G
U.S. Parent
Company



Consoldiated earnings per share (EPS) $ 16.75
EBT by country, US$ $ 4,500.00
Tax payments by country in US dollars $ 1,575.00

Consolidated EBT $ 15,419.34
Total tax bill $ 4,534.70
Effective tax rate 29.4%
INTERNET EXERCISE:
Put your findings here. PAGE 27

on, no
on, the
forgoe less
country.
. Third,
trade
de theory.
g firm, with wholly owned subsidiaries in Brazil, Germany, and China, in

has 650,000 shares outstanding. The basic operating characteristics of the
German Chinese
Subsidiary Subsidiary
(euros, €) (yuan, Y)
€ 4,500 Y2,500
40% 30%
€0.7018/$ Y7.750/$
s per share in U.S. dollars?
German Chinese
4,500.00 2,500.00
40% (1,800.00) 30% (750.00)
2,700.00 1,750.00
0.7018 7.7500
$ 3,847.25 $ 225.81
40.1% 2.4%
y, inducing an economic recession within the country. What would be the

arnings and exchange rates remaining the same?
German Chinese
4,500.00 2,500.00
40% (1,800.00) 30% (750.00)
2,700.00 1,750.00
0.7018 7.7500
$ 3,847.25 $ 225.81
U.S. dollar
German Chinese
4,500.00 2,500.00
40% (1,800.00) 30% (750.00)
2,700.00 1,750.00
0.7018 7.7500
$ 3,847.25 $ 225.81
y, inducing an economic recession within the country. What would be the

before taxes in Brazil fell as a result of the recession to R$5,8000,000?
German Chinese
4,500.00 2,500.00
40% (1,800.00) 30% (750.00)
2,700.00 1,750.00
0.7018 7.7500
$ 3,847.25 $ 225.81
rico's Brazilian sales decline
German Chinese
4,500.00 2,500.00
40% (1,800.00) 30% (750.00)
2,700.00 1,750.00
0.7018 7.7500
$ 3,847.25 $ 225.81
s in recent years.
reciate 20% against the U.S. dollar?
preciate 20% against the U.S. dollar?
1.8000 0.7018 7.7500

20% 20% 20%
1.5000 0.5848 6.4583
Brazilian German Chinese

Subsidiary Subsidiary Subsidiary
(reais, R$) (euros, €) (yuan, Y)
6,250.00 4,500.00 2,500.00

(1,562.50) 40% (1,800.00) 30% (750.00)
4,687.50 2,700.00 1,750.00
1.5000 0.5848 6.4583

$ 3,125.00 $ 4,616.70 $ 270.97
EPS has changed by: 13.9%

1.8000 0.7018 7.7500
-20% -20% -20%
2.2500 0.8773 9.6875

6,250.00 4,500.00 2,500.00

(1,562.50) 40% (1,800.00) 30% (750.00)
4,687.50 2,700.00 1,750.00
2.2500 0.8773 9.6875

$ 2,083.33 $ 3,077.80 $ 180.65
EPS has changed by: -13.9%
sumptions and answer the following questions regarding Americo’s global tax liabilities:
in corporate income taxes?
d a corporate tax reduction to 28%, and Americo’s earnings before tax in Germany rose

6,250.00 4,500.00 2,500.00

(1,562.50) 40% (1,800.00) 30% (750.00)
4,687.50 2,700.00 1,750.00
1.8000 0.7018 7.7500
$ 2,604.17 $ 3,847.25 $ 225.81
$ 868.06 $ 2,564.83 $ 96.77
$ 3,472.22 $ 6,412.08 $ 322.58
tituted a tax cut to 28% and German subsidiary earnings rose to 5 million euros?

6,250.00 5,000.00 2,500.00

(1,562.50) 28% (1,400.00) 30% (750.00)
4,687.50 3,600.00 1,750.00
1.8000 0.7018 7.7500

$ 2,604.17 $ 5,129.67 $ 225.81
$ 3,472.22 $ 7,124.54 $ 322.58
$ 868.06 $ 1,994.87 $ 96.77

Questions: 10: Why is the formation and use of the euro considered to be of such a great
accomplishment? Was it really needed? Has it been successful?
The citizen of the EU benefited from certain economic advantages from the euro. The euro made it
easier to travel since people do not have to exchange currency and the currency risk was removed
from the european trade. Furthermore, the integration of the euro makes prices transparent and it
increases competition between members. The best benefit from the euro is that it's controlled by the
European Central Bank. The ECB controls the balance from all the nations and it avoid politica
preasure that could lead to inflation.
Question 18: What choices do you believe that China will make in terms of the Impossible Trinity as
it continues to develop global trading and use of the Chinese yuan?
I believe that in order to achieve the impossible Trinity, China would have to established an
estable exchange rate, full financial integration and monetary interdependance would also
help China acvhie its goal.
Problem 2.1 Chantal DuBois in Brussels
Chantal DuBois lives in Brussels. She can buy a U.S. dollar for €0.7600.
Christopher Keller, living in New York City, can buy a euro for $1.3200.
What is the foreign exchange rate between the dollar and the euro?
Assumptions Values
Buy a US dollar in Brussels fo 0.7600

Which
is
equivalent,
the
reciprocal
($/€) $1.3158
Buy a euro in NY for ($/€) $1.3200

Which
is
equivalent,
the
reciprocal
(€/$) 0.7576
There is an obvious minor difference between the two currency quotes.
Problem 2.5 Toyota Exports to the United Kingdom
Toyota manufactures most of the vehicles it sells in the United Kingdom in Japan.
The base platform for the Toyota Tundra truck line is ¥1,650,000. The spot rate of
the Japanese yen against the British pound has recently moved from ¥197/£ to
¥190/£. How does this change the price of the Tundra to Toyota's British
subsidiary in British pounds?
Toyota manufactures most of the vehicles it sells in the United Kingdom in Japan.
The base platform for the Toyota Tundra truck line is ¥1,650,000. The spot rate of
the Japanese yen against the British pound has recently moved from ¥197/£ to
¥190/£. How does this change the price of the Tundra to Toyota's British
subsidiary in British pounds?
Assumptions Values
Original spot rate, Japanese yen/British pound 197.00
New spot rate, Japanese yen/British pound 190.00
Export price of Toyota Tunda truck, Japanese yen 1,650,000
Original
Import Price in
British pounds 8,375.63
Export price in yen / Original spot rate in yen/pound
New Import
Price in British
pounds 8,684.21
Export price in yen / New spot rate in yen/pound
Percentage
change in the
price of the
imported truck 3.68%
New price / Old price - 1
Because the price of the truck itself did not change, the percentage change in the
import price as expressed in British pounds is the same percentage change in the
value of the Japanese yen against the British pound itself.
Problem 2.9 Chinese Yuan Revaluation
Many experts believe that the Chinese currency should not only be revalued
against the U.S. dollar as it was in July 2005, but also be revalued by 20% or 30%.
What would be the new exchange rate value if the yuan was revalued an additional
20% or 30% from its initial post-revaluation rate of Yuan 8.11/$?
Many experts believe that the Chinese currency should not only be revalued
against the U.S. dollar as it was in July 2005, but also be revalued by 20% or 30%.
What would be the new exchange rate value if the yuan was revalued an additional
20% or 30% from its initial post-revaluation rate of Yuan 8.11/$?
Calculation of Percentage Change in Value Values

Initial exchange
rate, post
official
revaluation
(Yuan/$) 8.11
Percentage
revaluation
against the US
dollar 20.00%
Revalued
exchange rate
(Yuan/$) 6.76
Initial exchange
rate, post
official
revaluation
(Yuan/$) 8.11
Percentage
revaluation
against the US
dollar 30.00%
Revalued
exchange rate
(Yuan/$) 6.24
As painfully obvious, it is clear why so many critics of the Chinese yuan policy
were not particularly happy with the revaluation of only 2.1%.
Internet Exercise 1:
Put findings here.
The SDR was created in 1996 by the International Monetary Fun, it's a reserve assets that sumplements its members countries
Currency Weights determined Fixed Number of Units of

Currency for a 5-year
in the 2015 review period Starting Oct 1,
2016
U.S. Dollar 41.73 0.58252
Euro 30.93 0.38671
Chinese Yuan 8.33 1.0174
Japanese Yen 8.09 11.9
Pounding Sterli 10.92 0.085946
The International Monetary Fund always keeps control of currency exchange. If any of the members do not
comply with the requirements, they are subject to an inspection. If there is any discrepancy, the member
should make a arragement to fix the problem. In addition, "all requests by a member under Article VIII,
Sections 2 and 3, that the Fund approve the imposition of restrictions on the making of payments and
transfers for current international transactions, or the use of discriminatory currency arrangements or
multiple currency practices, shall be submitted to the Executive Board in writing, with a statement of the
reasons for making the request (International Monetary Fund)." The executive board approves all request
the Fund arranges through the fiscal agencies of members that frequent and regular information as to the
market rates of members' currencies bought and sold in their territories is made available to the Fund
(International Monetary Fund).
The current Australian $/ US Dollar rate is = to 0.7278/1.3741
The customer rate depends on the number of of time you have made transfer with OFX and how much money you are willing
Pacific Exchange Rate Per $1

British Pound Japanese Yen
2016 0.74063 108.793
2015 0.65455 121.044
2014 0.60773 105.945
2013 0.63966 97.596
2012 0.63305 79.79
2011 0.62414 79.807
2010 0.64718 87.78
2009 0.64718 93.57
2008 0.54397 103.359
2007 0.49977 117.754
2006 0.54349 116.299
2005 0.55000 110.218
2004 0.54618 108.193
2003 0.61247 115.933
2002 0.66722 125.388
2001 0.69466 121.529
Pacific Exchange Rate Per Brittish Pound

Japanese Yen
2016 174.95
2015 187.93
2014 189.29
2013 198.09
2012 200.4
2011 213.99
2010 235.61
2009 190.01
2008 145.77
2007 135.63
2006 127.87
2005 126.04
2004 152.57
2003 174.33
2002 184.93
2001 146.89
ements its members countries'.
he members do not
ancy, the member
under Article VIII,
of payments and
arrangements or
a statement of the
pproves all request
formation as to the
lable to the Fund
w much money you are willing to transfer.

CHAPTER 3 ASSIGNMENTS
Question 1: What is the balance of payments?
Question 3: Importance of BOP. Business managers and investors need BOP data to

anticipate changes in host-country economic policies that might be driven by BOP events.
From the perspective of business managers and investors, list three specific signals that a
country’s BOP data can provide.
Question 8: Current Account. What are the main component accounts of the current
account? Give one debit and one credit example for each component account for the United
States.
Question 12: The Financial Account. What are the primary sub-components of the financial
account? Analytically, what would cause net deficits or surpluses in these individual
components?
China's (Mainland) Balance of Payments
Use the following Chinese (Mainland) balance of payments data from the IMF to answer questions 3.10 through 3.13.
3.10 Is China experiencing a net capital inflow or outflow?

3.11 What is China's Total for Groups A and B?
3.12 What is China's Total for Groups A through C?
3.13 What is China's Total for Groups A through D?
3.14 Does China's BOP balance?
Assumptions (millions of US dollars) 2000 2001 2002
A. Current account balance 20,518 17,401 35,422

B. Capital account balance -35 -54 -50
C. Financial account balance 1,958 34,832 32,341
D. Net errors and omissions -11,748 -4,732 7,504
E. Reserves and related items -10,693 -47,447 -75,217
Questions 2000 2001 2002

3.10 Is China 1,923 34,778 32,291
experiencing a
net capital
inflow or
outflow?
"inflow" "inflow" "inflow"
3.11 What is
China's Total for 20,483 17,347 35,372
Groups A and
B?
3.12 What is
China's Total for 22,441 52,179 67,713
Groups A
through C?
3.13 What is
China's Total for 10,693 47,447 75,217
Groups A
through D?
3.14 Does China's BOP balance? 0 0 0

Yes Yes Yes
Internet Exercise: 3
Put Internet findings here.
Page 86
U.S. Bureau of Economic Analysis. Use the following Bureau of Economic Analysis (U.S. government) and
the Ministry of Finance (Japanese government) Web sites to find the most recent balance of payments
statistics for both countries.
Bureau of
Economic www.bea.gov/international/
Analysis
Ministry of www.mof.go.jp/
Finance
hrough 3.13.
2003 2004 2005 2006 2007
45,875 68,659 134,082 231,844 353,183

-48 -69 4,102 4,020 3,099
52,774 110,729 96,944 45,285 91,132
17,985 10,531 15,847 3,502 13,237
-116,586 -189,849 -250,975 -284,651 -460,651
2003 2004 2005 2006 2007

52,726 110,660 101,046 49,305 94,231
"inflow" "inflow" "inflow" "inflow" "inflow"
45,827 68,590 138,184 235,864 356,282
98,601 179,319 235,128 281,149 447,414
116,586 189,849 250,975 284,651 460,651
0 0 0 0 0
Yes Yes Yes Yes Yes
2008 2009 2010 2011 2012
420,569 243,257 237,810 136,097 215,392

3,051 3,938 4,630 5,446 4,272
37,075 194,494 282,234 260,024 -36,038
18,859 -41,181 -53,016 -13,768 -87,071
-479,554 -400,508 -471,658 -387,799 -96,555
2008 2009 2010 2011 2012

40,126 198,432 286,864 265,470 -31,766
"inflow" "inflow" "inflow" "inflow" "Outflow"
423,620 247,195 242,440 141,543 219,664
460,695 441,689 524,674 401,567 183,626
479,554 400,508 471,658 387,799 96,555
0 0 0 0 0
Yes Yes Yes Yes Yes
2013
182,807
3,052
323,151
-77,628
-431,382
2013
326,203
"inflow"
185,859
509,010
431,382
0
Yes
CHAPTER 4 ASSIGNMENTS
Question 14: Good governance - has a value in the market place?
Good governance is used to compare successful economies or just to compare one corporation to the
other. Good governance shows what the company has been doing and what practices has implemented,
which helps build a certain level of trust in stakeholders and the public. Thus, it attracks more investors
because it generates trust and stakeholders are more tempted to invest and pay higher premiums as a
result of good governance.
Problem 4.2 Vaniteux's Returns (A)
Spencer Grant is a New York-based investor. He has been closely following his investment in 100 shares of Vaniteux,
a French firm that went public in February of 2010. When he purchased his 100 shares at €17.25 per share, the euro
was trading at $1.360/€. Currently, the share is trading at €28.33 per share, and the dollar has fallen to $1.4170/€.
a. If Spencer sells his shares today, what percentage change in the share price would he receive?
b. What is the percentage change in the value of euro versus the dollar over this same period?
c. What would be the total return Spencer would earn on his shares if he sold them at these rates?
Share Exchange Rate

Assumptions Price (US$/€)
Prices when Spencer purchased his shares € 17.25 1.3600
Prices Spencer sees in the market today € 28.33 1.4170
a. If Spencer sold his shares today, what is the percentage change in the share price he would receive?
Return = (P2 - P1) / (P1) 64.23%
b. What has been the percentage change in the value of euro versus the dollar over this same period?
Percentage change (US$/€)

= ( S2 - S1 ) / (S1) 4.19%
c. What would be the total return Spencer would earn on his shares if he sold them at these rates?
If he sold his shares today, it would yield the following amount in euros:
These euros would in turn be worth the following in US dollars:
The amount he invested in the beginning can be determined by tracing backwards the cost of 100 shares of Vaniteux at
the original price, and then finding what that amount would have been in U.S. dollars.
Original investment (cost) of 100 shares in Vaniteux in euros:

Original investment (cost) of shares in U.S. dollars, calculated at original spot rate:
The rate of return on Spencer's investment, proceeds divided by initial investment:

(Remember to subtract 1, the value of the initial investment, when calculating return.)
Alternatively, the total return which Spencer could earn if he sold his shares now, can be calculated by finding
compound rate of return of the change in the share price and the change in the value of the euro.
Percentage return = ( 1 + percent change in share price) x (1 + percent change in spot rate) - 1
Percentage return = ( 1 + .6423 ) x ( 1 + .0419 ) - 1 =
Problem 4.13 Mattel's Global Sales Performance
Mattel (U.S.) achieved significant sales growth in its major international regions between 2001 and 2004. In its filings with the United States
Commission (SEC), it reported what percentage change in regional sales occurred as a result of exchange rate changes.
Answer to a)
(1)
Percent
2001 2002 Change in
(thousands of US$) Sales ($) Sales ($) Gross Sales
Europe $ 933,450 $ 1,126,177 20.6%
Latin America 471,301 466,349 -1.1%
Canada 155,791 161,469 3.6%
Asia Pacific 119,749 136,944 14.4%
Total International $ 1,680,291 $ 1,890,939 12.5%
United States 3,392,284 3,422,405 0.89%
Sales Adjustments (384,651) (428,004) 11.3%
Total Net Sales $ 4,687,924 $ 4,885,340 4.0%
(1)
Percent
2002 2003 Change in
Europe $ 1,126,177 $ 1,356,131 20.4%
Latin America 466,349 462,167 -0.9%
Canada 161,469 185,831 15.1%
Asia Pacific 136,944 171,580 25.3%
United States 3,422,405 3,203,814 -6.4%
Sales Adjustments (428,004) (419,423) -2.0%
Total Net Sales $ 4,885,340 $ 4,960,100 1.5%
(1)
Percent
2003 2004 Change in
Europe $ 1,356,131 $ 1,410,525 4.0%
Latin America 462,167 524,481 13.5%
Canada 185,831 197,655 6.4%
Asia Pacific 171,580 203,575 18.6%
United States 3,203,814 3,209,862 0.2%
Sales Adjustments (419,423) (443,312) 5.7%
Total Net Sales $ 4,960,100 $ 5,102,786 2.9%
Note: The "net change in sales" by global region is determined by netting the change in currency rates from the calcualted percent change in
Column (1) + Column (2).
Answer to c)
Over the 2001 to 2004 period, Mattel benefited greatly from the change in exchange rates. Only in the case of Latin America, where exchang
actually negative in impact on sales levels for the entire period, did the exchange rate changes not positively impact regional sales.
INTERNET EXERCISE 1
Put internet answer here. DO ONLY FOR: 1) Walt Disney and 2) Royal Dutch/Shell
Page 116
The Walt Disney company operates globally and its revenue comes from different segments; parks, resorts, studio
entertaiment, cosumer products, interactive media, and media networks. According to its corporate website annual
report, in 2017, Walt Disney earned a revenue of $55.14 billion, which 41.88 billions was generated by the U.S.
Royal Dutch/Shell is a oil and gas company, which owns investments across various companies. The company also has
interest in energy related business and chemicals. The oil company has increased its revenue over the past three
years, in 2015 the total revue was of 264.960 million dollars. The total revenue in 2016 was of 233.59 million dollars .
In 2017 revenue earned was of 305.18 million dollars. The company is one of the top five oil and gas company and it's
headquartered in Hague, Netherlands. The company generated its major revenue from Europe (100,609), followed by
Asia, Africa, Oceana (114,683), the U.S. (66,854), and the Americas ($23,033).
on to the
mplemented,
e investors
miums as a
n 100 shares of Vaniteux,

.25 per share, the euro
fallen to $1.4170/€.
ve?
tes?
would receive?
same period?
€ 2,833.00
$4,014.36
100 shares of Vaniteux at
€ 1,725.00
$2,346.00
71.12%
ulated by finding
ro.
71.12%
In its filings with the United States Security and Exchange

rate changes.
Answer to b)
(2) (3)
Impact of Net
Change in Change in
Currency Rates Sales
7.0% 13.6%
-9.0% 7.9%
0.0% 3.6%
3.0% 11.4%
(2) (3)
Impact of Net
Change in Change in
15.0% 5.4%
-6.0% 5.1%
11.0% 4.1%
13.0% 12.3%
(2) (3)
Impact of Net
Change in Change in
8.0% -4.0%
-2.0% 15.5%
5.0% 1.4%
6.0% 12.6%
om the calcualted percent change in gross sales. Column (3) =
e of Latin America, where exchange rate changes were

ely impact regional sales.
parks, resorts, studio

porate website annual
nerated by the U.S.
. The company also has

e over the past three
233.59 million dollars .
nd gas company and it's
(100,609), followed by
33).

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Question 6: What is the theory of comparative advantage?

Question 7: Name 4 key limitations to the theory of comparative advantage.

Americo Industries - 2010

U.S. Parent Brazilian

Problem 1.10 Americo Industries' Consolidate Earnings

U.S. Parent Brazilian

Earnings before taxes, EBT (local currency) 4,500.00 6,250.00

Avg exchange rate for the period (fc/$) ------ 1.8000

Consolidated profits (total across units) $ 9,602.22

a. Consolidated earnings per share (EPS) $ 14.77

b. Proportion of total profits originating

c. Proportion of total profits originating

Problem 1.11 Americo's EPS Sensitivity to Exchange Rates (A)

U.S. Parent Brazilian

Earnings before taxes, EBT (local currency) 4,500.00 6,250.00

Avg exchange rate for the period (fc/$) ------ 1.8000

Consolidated profits (total across units) $ 9,602.22

Baseline earnings per share (EPS) $ 14.77

Brazilian reais falls in value against the U.S. dollar

U.S. Parent Brazilian

Avg exchange rate for the period (fc/$) ------ 3.0000

Consolidated profits (total across units) $ 8,560.56

"New" earnings per share (EPS) $ 13.17

EPS change from baseline: -10.8%

Problem 1.12 Americo's EPS Sensitivity to Exchange Rates (B)

U.S. Parent Brazilian

Earnings before taxes, EBT (local currency) 4,500.00 6,250.00

Avg exchange rate for the period (fc/$) ------ 1.8000

Consolidated profits (total across units) $ 9,602.22

Baseline earnings per share (EPS) $ 14.77

U.S. Parent Brazilian

Avg exchange rate for the period (fc/$) ------ 3.0000

Consolidated profits (total across units) $ 8,448.06

Revised earnings per share (EPS) $ 13.00

Change in EPS from both changes: -12.0%

Problem 1.13 Americo's Earnings and the Fall of the Dollar

Baseline exchange rate (fc/$) -----

Appreciation Case U.S. Parent

Earnings before taxes, EBT (local currency) 4,500.00

Avg exchange rate for the period (fc/$) ------

Consolidated profits (total across units) $ 10,937.67

Baseline earnings per share (EPS) $ 14.77

EPS if foreign currencies appreciate $ 16.83

Depreciation Case U.S. Parent

Earnings before taxes, EBT (local currency) 4,500.00

Avg exchange rate for the period (fc/$) ------

Consolidated profits (total across units) $ 8,266.78

Baseline earnings per share (EPS) $ 14.77

EPS if foreign currencies depreciate $ 12.72

Problem 1.14 Americo's Earnings and Global Taxation

Earnings before taxes, EBT (local currency) 4,500.00

Consolidated profits (total across units) $ 9,602.22

Consoldiated earnings per share (EPS) $ 14.77

Tax payments by country in US dollars $ 1,575.00

a. Total global tax bill, US$ $ 5,104.66

b. What is Americo's effective tax rate?

EBT by country, US$ $ 4,500.00