S sales he would be measured on the actual sales

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But more importantly, if his performance was based on the USD value of U.S. sales, he would be measured on the actual sales which he had direct control over. Santiago does not, and willl not, control the exchange rate between the dollar and the peso. And changes in that exchange rate could potentially destroy all growth in U.S. sales (and his bonus) as it did in 2013. In 2013 U.S. sales grew (not much, but they grew), and he would have theoretically recieved a bonus. But as measured in Mexican pesos in 2013, as a result of a fall in the value of the peso, his performance would have not been positive -- and probably so would be the value of his bonus.
Americo Industries - 2010U.S. ParentBrazilianGermanChineseCompanySubsidiarySubsidiarySubsidiaryBusiness Performance (000s, loccal currency)(US$)(reais, R$)(euros, €)(yuan, Y)Earnings before taxes (EBT)$4,500 R$6,250 € 4,500Y2,500 Corporate income tax rate35%25%40%30%Average exchange rate for the period------ R$1.80/$ €0.7018/$ Y7.750/$ Problem 1.10 Americo Industries' Consolidate EarningsProblems 6 through 10 are based on Americo Industries. Americo 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. Americo is traded on the NADSAQ. Americo currently has 650,000 shares outstanding. The basic operating characteristics of the various business units is as follows:Americo must pay corporate income tax in each country in which it currently has operations.a. After deducting taxes in each country, what are Americo's consolidated earnings and consolidated earnings per share in U.S. dollars?b. What proportion of Americo's consolidated earnings arise from each individual country?c. What proportion of Americo's consolidated earnings arise from outside the United States?U.S. ParentBrazilianGermanChineseCompanySubsidiarySubsidiarySubsidiaryBusiness 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 taxes35% (1,575.00)25% (1,562.50)40% (1,800.00)30% (750.00)Net profits of individual subsidiary2,925.00 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 country30.5%27.1%40.1%2.4%c. Proportion of total profits originating from outside the United States69.5%

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