Chapter_01 - Problem 1.6 Luzon Industries Consolidated...

Problem 1.6 Luzon Industries' Consolidated Results
US Parent Brazilian German Chinese
Company Subsidiary Subsidiary Subsidiary
Business Performance (000s) (US$) (reais, R$) (euros, €) (yuan, Y)
Earnings before taxes, EBT (local currency) 4,500.00 6,250.00 4,500.00 2,500.00
Less corporate income taxes 35% (1,575.00) 25% (1,562.50) 40% (1,800.00) 30% (750.00)
Net profits of individual subsidiary 2,925.00 4,687.50 2,700.00 1,750.00
Avg exchange rate for the period (fc/$) ------ 1.8000 0.7018 7.7500
Net profits of individual subsidiary (US$) $2,925.00 $2,604.17 $3,847.25 $225.81
Consolidated profits (total across units) $9,602.22
Total diluted shares outstanding (000s) 650.00
a. Consolidated earnings per share (EPS) $14.77
b. Proportion of total profits originating
by country 30.5% 27.1% 40.1% 2.4%
c. Proportion of total profits originating
from outside the United States 69.5%
Problems 6 through 10 are based on Luzon Industries. Luzon is a U.S.-based multinational manufacturing firm, with wholly owned subsidiaries in Brazil,
Germany, and China, in addition to domestic operations in the United States. Luzon is traded on the NADSAQ. Garrison currently has 650,000 shares
outstanding. The basic operating characteristics of the various business units are as follows:

Problem 1.9