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Fundamentals of Multinational Finance Chapter 1 Problems
6-10 Americo Industries
International Finance (Universidad Tecnológica de Bolívar)
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Americo Industries—2010
Problems 6–10 are based on Americo Industries. Americo is
a U.S.-based multinational manufacturing firm with whollyowned subsidiaries in Brazil, Germany, and
addition to domestic operations in the United States. Americo
is traded on the NASDAQ. Americo currently has 650,000
shares outstanding. The basic operating characteristics of
the various business units is as follows:
Excersice 6
650,000.00
650.00
# shares
# shares (000s)
U.S.
Parent
Company
(US$
Business Performance
Earnings
before
taxes
Corporate
income tax
rate
Average
exchange
rate for the
period
$
Brazilian
Subsidiary
(reais, R$)
4,500.00
35%
German
Subsidiary
(euros, €)
Chinese
Subsidiary
(yuan, ¥)
R$ 6,250.00
4,500.00 €
¥2,500.00
25%
40%
30%
R$ 1.80
0.70 €
¥7.75
$
1.00
Inverse average exchange rate
$
1.00 $
0.56 $
1.42 $
0.13
Net earnings
$
2,925.00 $
4,687.50 $
2,700.00 $
1,750.00
Net earnings (US$)
$
2,925.00 $
2,604.17 $
3,847.25 $
225.81
Global total earnings
Earnin per share (EPS)
Proprtion per country
Outside earnings proportion
$
9,602.22
$
0.01477
30.46%
27.12%
69.54%
40.07%
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2.35%
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, and China, in
Excersice 7
650,000.00
650.00
# shares
# shares (000s)
Business Performance
Earnings
before
taxes
Corporate
income tax
rate
Average
exchange
rate for the
period
U.S.
Parent
Company
(US$
$
Brazilian
Subsidiary
(reais, R$)
4,500.00
35%
German
Subsidiary
(euros, €)
R$ 6,250.00
4,500.00 €
25%
40%
R$ 3.00
0.70 €
$
1.00
Inverse average exchange rate
$
1.00 $
0.33 $
1.42
Net earnings
$
2,925.00 $
4,687.50 $
2,700.00
Net earnings (US$)
$
2,925.00 $
1,562.50 $
3,847.25
Global total earnings
Earnin per share (EPS)
100.00% Proprtion per country
Outside earnings proportion
-10.85%
$
$
34.17%
18.25%
65.83%
44.94%
If the exchange rate of the Brazilian real falls to
Americo's consolidated EPS would be reduced by
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Excersice 8
# shares
# shares (000s)
Chinese
Subsidiary
(yuan, ¥)
Business
Performance
¥2,500.00
30%
¥7.75
$
0.13
$
1,750.00
$
225.81
8,560.56
0.01317
2.64%
R $ 3.00 / $,
ced by 10.85%
Earnings
before
taxes
Corporate
income tax
rate
Average
exchange
rate for the
period
650,000.00
650.00
U.S.
Parent
Company
(US$
$
Brazilian
Subsidiary
(reais, R$)
4,500.00
35%
$
1.00
Inverse average
exchange rate
$
Net earnings
R$ 5,800.00
4,500.00 €
25%
40%
$
0.70
1.00 $
0.33 $
1.42
$
2,925.00 $
4,350.00 $
2,700.00
Net earnings (US$) $
Global total
$
earnings
2,925.00 $
1,450.00 $
3,847.25
Earnin per share
$
Proprtion per
100.00% country
Outside earnings pro
-12.02%
34.62%
$
German
Subsidiary
(euros, €)
3.00
17.16%
65.38%
45.54%
If the exchange rate of Brazilian reals falls to
and additionally the recession in Brazil causes EBT
5800, Americo's consolidated EPS would be reduced by
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Excersice 9-A
# shares
# shares (000s)
Chinese
Subsidiary
(yuan, ¥)
Business
Performance
¥2,500.00
30%
$
7.75
$
0.13
$
1,750.00
$
225.81
8,448.06
0.01300
2.67%
R $ 3.00 / $
EBT to fall to R $
ced by 12.02%
Earnings
before
taxes
Corporate
income tax
rate
Average
exchange
rate for the
period
650,000.00
650.00
U.S.
Parent
Company
(US$
$
Brazilian
Subsidiary
(reais, R$)
4,500.00
35%
$
1.00
Inverse average
exchange rate
$
Net earnings
Net earnings
(US$)
Global total
earnings
R$ 5,800.00
4,500.00 €
25%
40%
$
0.84
1.00 $
0.46 $
1.19
$
2,925.00 $
4,350.00 $
2,700.00
$
2,925.00 $
2,013.89 $
3,206.04
2.16
$
Earnin per share $
Proprtion per
100.00% country
Outside earnings pro
-13.22%
$
German
Subsidiary
(euros, €)
35.10%
24.17%
64.90%
38.47%
If all foreign currencies appreciate 20% against the US do
Americo's consolidated EPS would decrease by
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Excersice 9-B
650,000.00
650.00
# shares
# shares (000s)
Chinese
Subsidiary
(yuan, ¥)
Business
Performance
¥2,500.00
30%
$
9.30
$
0.11
$
1,750.00
$
188.17
8,333.10
0.01282
2.26%
the US dollar,
by 13.22%
Earnings
before
taxes
Corporate
income tax
rate
Average
exchange
rate for the
period
U.S.
Parent
Company
(US$
$
Net earnings
(US$)
Global total
earnings
$
1.00
German
Subsidiary
(euros, €)
Chinese
Subsidiary
(yuan, ¥)
R$ 5,800.00
4,500.00 €
¥2,500.00
25%
40%
30%
$
1.00 $
1.44
$
0.69 $
0.56
$
6.20
1.78 $
0.16
$
2,925.00 $ 4,350.00 $ 2,700.00 $ 1,750.00
$
2,925.00 $ 3,020.83 $ 4,809.06 $
$
282.26
11,037.15
Earnin per share $
Proprtion per
country
Outside earnings pro
14.94%
4,500.00
35%
Inverse average
exchange rate
$
Net earnings
Brazilian
Subsidiary
(reais, R$)
0.01698
26.50%
27.37%
73.50%
43.57%
2.56%
If all foreign currencies depreciate 20% against the U.S.
dollar, Americo's consolidated EPS would increase by
14.94%
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Excersice 10-C
# shares
650,000.00
# shares (000s)
650.00
U.S.
Parent
Business
Performance Company
(US$
Earnings
before
$
4,500.00
taxes
Corporate
income tax
35%
rate
Average
exchange
$
1.00
rate for the
period
Inverse
average
exchange
rate
$
1.00
Net earnings $
Net earnings
(US$)
$
Global total
$
earnings
Earnin per
share
$
Proprtion per
country
Outside earnin
11.40%
Brazilian
Subsidiary
(reais, R$)
German
Subsidiary
(euros, €)
Chinese
Subsidiary
(yuan, ¥)
R$ 5,800.00
5,000.00 €
¥2,500.00
25%
28%
30%
$
1.80
$
$
0.56 $
0.70
$
7.75
1.42 $
0.13
2,925.00 $
4,350.00 $ 3,600.00 $ 1,750.00
2,925.00 $
2,416.67 $ 5,129.67 $
225.81
10,697.14
0.01646
27.34%
22.59%
72.66%
47.95%
2.11%
If tax rate in germany went down to 28%, and earnings before
taxes rose to 5 millions EPS would rise a 11,40% compare to
the original case
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10-A
$
5,104.66
$
14,706.89
Total amount that Americo is paying across its global
business in corporate income taxes
Americo’s effective tax rat
10-B
34.71%
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