Answer:
after-tax rate of return from this investment = 6.48 %
Explanation:
given data
invested = $250,000
interest 1 = 7%
interest 2 = 9%
marginal tax rate = 24%
to find out
after-tax rate of return from this investment
solution
we know that after-tax rate of return from this investment will be here
after-tax rate of return from this investment = [ ( 1 - marginal tax rate ) × ( investment × interest 2) ] ÷ investment ...........................1
put here value we get
after-tax rate of return from this investment = [ ( 1 - 0.28 ) × ( $25000×0.09)] ÷$25000
so
after-tax rate of return from this investment = 0.0648
so
after-tax rate of return from this investment = 6.48 %
Answer: The amount the company would recognize is $100 as a gain from foreign currency translation.
Explanation: On October 1, a receivable of $2,860 (2,000 pounds x $1.43) would have been recorded. However, this amount of receivable has to be revalued using the year-end rate of $1.45, based on the principles of <em>IAS 21 The Effects of Changes in Foreign Exchange Rates</em>. Year-end receivable would then be $2,900 (2,000 pounds x $1.45). A foreign exchange gain of $40 would be recognised by debiting receivable and crediting gain on foreign currency translation (which reports in income statement) with $40 ($2,900 - $2,860). This is necessary to revalue the receivable using the year-end rate. Subsequently, the spot rate moved to $1.50 at the point of collection, this simply means the company has made a $100 exchange gain (2,000 pounds x $1.50 = $3,000 - $2,900). The journal entries to be raised would be Debit Cash $3,000; Credit Receivable $2,900, Credit Exchange gain (income statement) $100.