If the European Subsidiary of a U

question 28

Multiple Choice

If the European subsidiary of a U.S. firm has net exposed assets of €750,000, and the euro drops in value from $1.30/euro to $1.20/€ the U.S. firm has a translation:

• A) gain of $75,000.
• B) loss of $75,000.
• C) gain of $625,000.
• D) loss of €576,923.

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Definitions:

Marginal Cost

The additional expenditure involved in making one more unit of a product or service.

Retail Price

The total cost at which a product or service is sold to the end consumer, including any markups by retailers.

Price Elasticities

Measures the responsiveness of demand or supply of goods and services to changes in their prices.

Marginal Cost

The expenditure required to create one more unit of a product or service.