EuroVirtual's EPS Sensitivity to Exchange Rates (A). EuroVirtual is a French-based multinational IT firm. In addition to its home operations in France, EuroVirtual owns and operates subsidiaries in Switzerland, the United Kingdom, and Denmark. It has 649,000 shares currently outstanding on the pan-European stock exchange: Euronext. The following table summarizes the business performance of EuroVirtual: (Click on the icon to import the table into a spreadsheet.) French Parent Company (euros, ) Swiss Subsidiary (Swiss franc, CHF) UK Subsidiary (British Pound, GBP) Danish Subsidiary (Danish krone, DKK) Earnings before taxes (EBT) in 000s of domestic currency Corporate income tax rate Average cross rate per EUR1 2,490 33.3% 410 25% 1.0289 2,090 20% 0.7377 4.520 23% 7.4464 Since its introduction in 2003, the euro has been fluctuating against major global currencies EuroVirtual pays different tax rates for each of its country operations a) What are its earnings per share in EUR after deducting taxes? b) What is the impact of 15% appreciation of all major currencies against the euro on the consolidated EPS of EuroVirtual? c) What is the impact of 20% depreciation of all major currencies against the euro on the consolidated EPS of EuroVirtual? a) What are its earnings per share in EUR after deducting taxes? First, calculate net profits of individual subsidiaries in local currency below. (Round to two decimal places) French Parent Swiss UK Danish Company () Subsidiary (CHF) Subsidiary (GBP) Business Performance (000s) Earnings before taxes, EBT Subsidiary (DKK) 4,520.00 2,490.00 410.00 2,090.00 33.3% 25% 20% 23% Less corporate income taxes Net profits in local currency Following, calculate net profits of individual subsidiaries in euros below. (Round to two decimal places) NE French Parent Swiss UK Danish Company Subsidiary Subsidiary Subsidiary (DKK) () (CHF) (GBP) Business Performance (000s) Net profits in local currency Average exchange rate (fc/euro) Net profits in euros 1.0289 0.7377 74464 Next, we calculate the consolidated net profits in euros The consolidated net profits in euros are (000s) C (Round to two decimal places.) Last, we calculate the earnings per share in euros TEN Next, we calculate the consolidated net profits in euros. The consolidated net profits in euros are (000s) E (Round to two decimal places.) Last, we calculate the earnings per share in euros. The amount of earnings per share in euros is (Round to two decimal places.) b) What is the impact of 15% appreciation of all major currencies against the euro on the consolidated EPS of EuroVirtual? The new exchange rate is: Exchange rate Exchange rate (new) = 1 + Appreciation Calculate net profits of individual subsidiaries in euros. (Round net profits to two decimal places and exhange rates to five decimal places.) CIC Calculate net profits of individual subsidiaries in euros: (Round net profits to two decimal places and exhange rates to five decimal places.) Swiss UK Danish Subsidiary (CHF) Subsidiary (GBP) Subsidiary (DKK) Business Performance (000s) Net profits in local currency Average exchange rate (fcleuro) Net profits in euros The new consolidated net profits in euros will be (000s) (Round to two decimal places.) The new earnings per share in euros will be (Round to two decimal places.) The earnings per share change from baseline is l%. (Round to two decimal places.) c) What is the impact of 20% depreciation of all major currencies against the euro on the consolidated EPS of EuroVirtual? Calculate net profits of individual subsidiaries in euros: (Round net profits to two decimal places and exhange rates to five decimal places.) Swiss UK Danish Subsidiary Subsidiary Subsidiary (GBP) Business Performance (000s) (CHF) (DKK) Net profits in local currency Average exchange rate (fc/euro) Net profits in euros Swiss UK Danish Subsidiary Subsidiary Subsidiary (DKK) Business Performance (000s) (CHF) (GBP) Net profits in local currency Average exchange rate (fc/euro) Net profits in euros The new consolidated net profits in euros will be (000s) (Round to two decimal places.) The new earnings per share in euros will be (Round to two decimal places.) The earnings per share change from baseline is %. (Round to two decimal places.)