If the European subsidiary of a U.S. firm has net exposed assets of euro200,000, and the euro increases in value from $1.22/eu

Question

3 years ago

8

ro to $1.26/euro the U.S. firm has a translation: A. loss of $8,000. B. gain of $8,000. C. loss of euro252,000. D. gain of $252,000.

1 answer:

larisa86 [58] · Answer 1 · 2022-04-04T19:41:46+03:00

Answer:

B. Gain $8,000

Explanation:

The calculation of exchange translation is shown below:-

Old exchange rate = Net exposed assets × Value of Euro

= 200,000 × $1.22

= $244,000

New value in euro = Net exposed assets × Increased exchange rate

= 200,000 × $1.26

= $252,000

Translation Profit = New value in euro - Old exchange rate

= $252,000 - $244,000

= $8,000

If the European subsidiary of a U.S. firm has net exposed assets of euro​200,000, and the euro increases in value from ​$1.22/eu