Assume That the Japanese Yen Is Expected to Depreciate Substantially

question 50

Multiple Choice

Assume that the Japanese yen is expected to depreciate substantially over the next year. A U.S.-based MNC has a subsidiary in Japan, where its costs exceed revenues. The overall value of the MNC will ____ because of the yen's depreciation.

• A)decrease
• B)increase
• C)remain unchanged
• D)A and C are possible

Calculate and interpret the margin of safety in both dollar and percentage terms.

Understand the concept of operating leverage and its effect on profitability.

Analyze the effects of fixed and variable costs on a company's financial performance.

Determine the effects of pricing and marketing decisions on a company's profitability.

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Definitions:

Net Exports

The value of a country's total exports minus its total imports. It is a component of a country's GDP calculation.

Imports

Imports are goods or services brought into a country from abroad for sale.

Exports

Items or services created in one country and traded to customers in another country.

Net Exports

The value of a country's total exports minus the value of its total imports, representing the net trade balance.