5. Crystal Publishing Company. Crystal Publishing Company publishes books in Europe through sepa- rate subsidiaries in several
Question:
5. Crystal Publishing Company. Crystal Publishing Company publishes books in Europe through sepa- rate subsidiaries in several countries. On a Europe- wide basis, Crystal publishing experiences uneven cash flows. Any given book creates a cash outflow during the period of writing and publishing, followed by a cash inflow in subsequent months and years as the book is sold. To handle these imbalances, Crystal decided to create an in-house bank. At the beginning of April, Crystal's in-house bank held deposits, on which it paid 4.8% interest, as follows:
At the beginning of April, Crystal's in-house bank advanced funds at an annual rate of 5.4% as follows:
The exchange rate between pounds sterling and the euro is 1.6000/.
a. What would be the net interest earnings (interest earned less interest paid, before administrative expenses), of Crystal's in-house bank for the month of April?
b. If parent Crystal Publishing subsidized the in- house for all of its operating expenses, how much more could the in-house bank loan at the begin- ning of April?
Step by Step Answer:
Fundamentals Of Multinational Finance
ISBN: 9780321541642
3rd Edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman