Question

Campbell co. is a u.s. firm that has a subsidiary located in jamaica. the subsidiary has generated losses for the last five years and is expected to generate losses for the next ten years because its costs denominated in jamaican dollars exceed the revenue that it receives in jamaican dollars. campbell is reluctant to divest this subsidiary, however. so the u.s. parent must periodically use some of its funds to pay for the high expenses in jamaica. given this information, campbell would benefit from a(n) ____ of the jamaican dollar.
a. stabilization

b. jamaican government pegging (set equal to u.s. dollar)

c. appreciation

d. depreciation

Answer 1

they would benefit from a depreciation of the Jamaican currency because the infusion of US dollars would have a greater impact for a lower cost.