Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Section B (50 marks) [25 marks each] 1. Lok Kee Sdn. Bhd. is a Malaysian subsidiary of Rookie A.G., a MNE established in Germany.

image text in transcribed

Section B (50 marks) [25 marks each] 1. Lok Kee Sdn. Bhd. is a Malaysian subsidiary of Rookie A.G., a MNE established in Germany. Rookie's consolidated financial statements are kept in euro. All of Lok Kee's previous earnings were reinvested as capital. The balance sheet of Lok Kee on 30 June 2020 is in the following: Assets Cash Accounts receivable Inventory Net plant & equipment Total MYR Liabilities & Net Worth 8,250,000 Accounts payable 16,500,000 Long-term debt 24,750,000 Invested capital 33,000,000 82,500,000 Total MYR 12,375,000 24,750,000 45,375,000 82,500,000 On 30 June 2020, the exchange rate was MYR5.00/Euro. On 1 July 2020, the Euro has suddenly appreciated by 10% against the MYR. a) What is the MYR/Euro exchange rate on 1 July 2020? (3 marks) b) Calculate the translation gains or loss to Rookie A.G. on 1 July 2020 with current rate method (only), assuming that there is no change in balance sheet accounts between these two days (15 marks) c) How much is the contribution of Lok Kee Sdn. Bhd.'s translation exposure (in Euro) to its parent company, Rookie A.G. on 30 June 2020 using the current rate method? (4 marks) d) How much would the MYR need to depreciate to have the equivalent net translation gain/loss as calculated in b)? (3 marks) (Total: 25 Marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Derivatives Markets

Authors: Robert McDonald

3rd Edition

978-9332536746, 9789332536746

More Books

Students also viewed these Finance questions

Question

What is meant by the notion of environmental flows?

Answered: 1 week ago