Bintang Seri, an Indonesian company has a Malaysian subsidiary that earned MYR30 million this year. Sari Bulan, which is also resided in Indonesia has a Malaysian subsidiary that earned MYR20 million this year. The subsidiary of Bintang Seri plans to reinvest its earnings in Malaysia while the subsidiary of Sari Bulan plans to remit its earnings to the Indonesian parent. Another Indonesian company, Milando does not have a Malaysian subsidiary but it received revenue of MYR 40 million this year from exporting to Malaysia. All three companies have the same total revenue and total earnings levels (when considering their Indonesian business as well), and are the same size, and do not have any other international business. Which company is subject to the highest degree of translation exposure? Justify your answer with thorough explanation on all companies.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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  1. Bintang Seri, an Indonesian company has a Malaysian subsidiary that earned MYR30 million this year. Sari Bulan, which is also resided in Indonesia has a Malaysian subsidiary that earned MYR20 million this year. The subsidiary of Bintang Seri plans to reinvest its earnings in Malaysia while the subsidiary of Sari Bulan plans to remit its earnings to the Indonesian parent. Another Indonesian company, Milando does not have a Malaysian subsidiary but it received revenue of MYR 40 million this year from exporting to Malaysia. All three companies have the same total revenue and total earnings levels (when considering their Indonesian business as well), and are the same size, and do not have any other international business. Which company is subject to the highest degree of translation exposure? Justify your answer with thorough explanation on all companies.
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