Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Imagine that you are a financial manager of a multinational corporation like Starbucks Cof...

Imagine that you are a financial manager of a multinational corporation like Starbucks Coffee in charge of determining the impact of exchange rate changes on the firm Changes in currency exchange

Imagine that you are a financial manager of a multinational corporation, like Starbucks Coffee, in charge of determining the impact of exchange rate changes on the firm. Changes in currency exchange affect both the balance sheet and the income statement. The balance sheet impact occurs when the value of international assets are translated to U.S. dollars. The values of those assets change as the exchange rate changes. The value of costs, revenue, and profit also are impacted on the income statement because of exchange rate risk. Consider that your firm has the following investments in coffee bean production and processing: COUNTRY VALUE (MILLIONS) Columbia ............ $75 Kenya ............. 100 Papua New Guinea ....... 80 The expense of all the labor, production, and beans will require the following exchanges to the foreign currency: COUNTRY CASH FLOW (MILLIONS) Columbia ........... 78,180 pesos Kenya ............ 3,200 shilling Papua New Guinea ........ 100 kina Your firm has also invested in store facilities to sell the coffee products. The countries and the value of the investments are: COUNTRY VALUE (MILLIONS) Canada ........... $200 Japan ............. 100 United Kingdom ....... 150 The net profit from these countries next year is projected to be: COUNTRY CASH FLOW (MILLONS) Canada ........... CA$80 Japan ............. ¥7,200 United Kingdom ....... £30 Current spot exchange rates are: $1 = 2,204.5 Columbian pesos $

 

May 23 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions