The table below shows the earnings and tax information for three international reporting segments of a company in a particular year.

a. What is the total consolidated after tax earnings for the company using the figures in the table?

b. If the exchange rates become C$1.25/US$, by what percent has the Canadian dollar appreciated or depreciated?

c. If the exchange rate becomes JPY 110/US$, by what percent has the Japanese yen appreciated or depreciated?

d. Assume that the company has the same earnings and tax rates but with these new exchange rates given in parts B & C. What would be the new after tax earnings for the company?

e. By what percent did after tax earnings decrease or increase (compared to your answer in Part A) following the currency movement?

f. Why are the percentages in parts C and E different? What lessons might a company draw about the role of international markets and exchange rates?

USA Canada Japan

Earnings before taxes $7,500 C$8,400 JPY352,350

Income tax rate 30% 25% 20%

Average exchange rate n/a C$1.30/US$ JPY107.5/US$