6. Sun Microsystems’ functional currency (intermediate). Referring to Sun Microsystems’ French subsidiary (see Exhibit 17.5), Marianne S.A., assume that due to the close production integration between U.S. and French operations the U.S. dollar is deemed to be the functional currency for consolidation purposes.

What is Sun Microsystems’ pro forma translation exposure? Assuming that the

€ is expected to revalue by 10 percent over the exposure horizon, show what gains/losses would be incurred by Sun Microsystems and where they would be reported.