EuroVirtual’s EPS Sensitivity to Exchange Rates (A).

On January 15, 2015 the Swiss National Bank (SNB)

decided to unpeg the franc, which was fixed at CHF1.20/€

since 2011. Suppose the SNB was to reverse its decision and readopt the previous peg. How would this affect the consolidated EPS of EuroVirtual if all other exchange rates, tax rates, and earnings remain unchanged?

In addition to its home operations in France, EuroVirtual owns and operates subsidiaries in Switzerland, the United Kingdom, and Denmark. It has 650,000 shares currently outstanding on the pan-European stock exchange: Euronext. The following table summarizes the business performance of EuroVirtual:

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French Parent Company (euros, ) Swiss Subsidiary (Swiss franc, CHF) Earnings before taxes (EBT) in 000s of domestic currency Corporate income tax rate Average cross rate per EUR1 EUR2,500 CHF400 GBP2,100 U.K. Subsidiary (British Pound, GBP) Danish Subsidiary (Danish krone, DKK) DKK4,500 33.3% 25% 20% 23% 1.0335 0.7415 7.4642