Assume That the Japanese Yen Is Expected to Depreciate Substantially

question 26

Multiple Choice

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

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

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Definitions:

External Market Price

The price at which goods or services are bought and sold outside of a company, determined by the supply and demand in the wider market.

Savings

The portion of income not spent on current expenditures or taxes, often set aside for future use or investment.

Excess Capacity

A scenario where a company's production facilities are capable of producing more than is needed to meet the demand.

Market-Based Transfer Prices

Transfer prices set based on market prices for similar goods or services, used in transactions between company divisions.