=+20-31 KKK Multinational firms, differing risk, comparison of profit, ROI and RI OBJECTIVES 3, 4, 7 WhangZutz Multinational has divisions in Australia, Germany and New Zealand. The Australian division is the oldest and most established of the three and has a cost of capital of 8%. The German division was started three years ago when the exchange rate for euros was 1 euro = AUD $1.25. Although it is a large and powerful division of WhanZutz Multinational, its cost of capital is 9%. The New Zealand division was started this year, when the exchange rate was NZD $1 = AUD $0.81. Its cost of capital is 13%.

Average exchange rates for the current year are 1 euro = AUD $1.15 and NZD $1 = AUD $0.87. Other information for the three divisions includes:

Australia Germany New Zealand Long-term assets $14 845 000 9 856 000 euros NZ$9 072 917 Operating revenues $10 479 000 5 200 000 euros NZ$4 800 000 Operating expenses $7 510 000 3 600 000 euros NZ$3 500 000 Income tax rate 40% 30% 20%

Required 1 Translate the German and New Zealand information into Australian dollars to make the divisions comparable. Find the after-tax operating profit for each division and compare the profits.