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H.D. uses risk sharing agreements with its own foreign subsidiaries. The agreement with Australian subsidiary is as follow:

Central rate or base A$ 1.28/US$

All contracts to Australian distribution will be at this exchange rate as long as the spot rate on order date is in the neutral boundary of + 5% of this rate. If the spot rate is outside this range, H.D. will share equally (50/50) the difference between spot and neutral boundary.

H.D. shipped goods worth $80,000. What will be the realization if the exchange rate on the order date was :

a) 1.42 A$/US$

b) 1.16 A$/US$

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92321975

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