Chapter 10
Q. 10.ST.5
Assume that the dollar is expected to strengthen against the euro over the next several years. Explain how this will affect the consolidated earnings of U.S.-based MNCs with subsidiaries in Europe.
Step-by-Step
Verified Solution
The earnings generated by the European subsidiaries will be translated to a smaller amount in dollar earnings if the dollar strengthens. Thus, the consolidated earnings of the U.S.-based MNCs will be reduced.