International Accounting
5th Edition
ISBN: 9781259747984
Author: Doupnik, Timothy S., Finn, Mark T., Gotti, Giorgio
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 5EP
Imogdi Corporation (a U.S-based company) has a wholly-owned subsidiary in Argentina, whose manager is being evaluated on the basis of the variance between actual profit and budgeted profit in U.S. dollars. Relevant information in Argentine pesos (
Current year actual and projected exchange rates between the ARS and the U.S. dollar (USD) are as follows:
Required:
- a. Calculate the total
budget variance for the current year using each of the five combinations of exchange rates for translating budgeted and actual results shown in Exhibit 10.10. - b. Make a recommendation to Imogdi’s corporate management as to which combination in item (a) should be used, assuming that the manager of the Argentinian subsidiary does not have the authority to hedge against changes in exchange rates.
- c. Make a recommendation to Imogdi’s corporate management as to which combination in item (a) should be used, assuming that the manager of the Argentinian subsidiary has the authority to hedge against unexpected changes in exchange rates.
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International Capital Budgeting Using the Foreign Currency Approach. ABC Company is considering a capital project with the cash flows as stated below in Euros. The project is in Euros and must be converted back to USD. The exchange rate is 0.83 Euros. The difference in the nominal rates between the two currencies is 2 percent.
The appropriate discount rate for the project is estimated to be 10%, the US cost of capital for the company.
What is the NPV of the project in US Dollars?
NPV
Year Cash Flows in Euro
0 € -2,900,000
1 €1,300,000
2 €1,300,000
3 €1,300,000
Round to the nearest cent and format as "XXX,XXX.XX"
Suppose you observe the following direct spot quotations in New York and Toronto,respectively: USD 0.8000-50 and CAD 1.2500-60. What are the arbitrage pr()fits per USD Imn?
1) The sales budget is based on assumptions about the ___________.
a) Number of units to be sold and selling price per unit.
b) Timing of cash receipts.
c) Contribution margin per unit and the number of units to be sold.
d) Costs of the units produced and the total fixed costs.
2) When constructing the production budget, the desired ending inventory for the period is determined based on:
a) Next period sales
b) Next period production
c) Last period production and sales
d) Credit period
3)Standard time allowed to complete one unit is 2 hours. A worker during a week (48 hours) completed 20 units and drawn a salary of Rs. 6000. The standard rate per day of 8 hours shift is Rs. 1000. Which one of the following is true?
a)Labour efficiency variance is Zero
b)Labour rate variance is zero
c)Labour cost variance is zero
d)None of the above
Chapter 10 Solutions
International Accounting
Ch. 10 - Prob. 1QCh. 10 - What makes calculation of NPV for a foreign...Ch. 10 - How does the evaluation of a potential foreign...Ch. 10 - Prob. 4QCh. 10 - How does an ethnocentric organizational structure...Ch. 10 - Prob. 6QCh. 10 - When might it be appropriate to evaluate the...Ch. 10 - Prob. 8QCh. 10 - Prob. 9QCh. 10 - How can a local currency operating budget and...
Ch. 10 - Prob. 11QCh. 10 - What is the advantage of using a projected future...Ch. 10 - Prob. 3EPCh. 10 - Prob. 4EPCh. 10 - Imogdi Corporation (a U.S-based company) has a...Ch. 10 - Philadelphia, Inc. (a Greek company) has a foreign...Ch. 10 - Fitzwater Limited (an Irish company) has a foreign...Ch. 10 - Prob. 9EPCh. 10 - Viking Corporation (a U.S.-based company) has a...Ch. 10 - Duncan Street Company (DSC), a British company, is...
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