Question
1. The following three companies: Alpha Co., Beta Co, and Gamma Co. are U.S. firms in the same industry and all three companies have the
1. The following three companies: Alpha Co., Beta Co, and Gamma Co. are U.S.
firms in the same industry and all three companies have the same valuation as of
yesterday. Alpha Co. has no international business. Beta Co. purchases supplies
invoiced in euros, and all sales are invoiced in dollars. Gamma Co. does all its
business in Europe and remits profit to the U.S. every year.
Assume that the event today will cause the euro to substantially appreciate against
the dollar over time. With no change in the business operation in all three
companies, which firm will have the highest valuation based on your prediction?
Justify your answer.
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