Santiago does not and willl not control the exchange rate between the dollar

Santiago does not and willl not control the exchange

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Americo Industries - 2015 U.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 1.13 Americo Industries' Consolidate EarningsProblems 13 through 17 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. 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%
Problem 1.14 Americo's EPS Sensitivity to Exchange Rates (A) U.S. 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 Baseline earnings per share (EPS) $ 14.77 Brazilian reais falls in value against the U.S. dollar U.S. 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)

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