Question: Americo is a U.S.-based multinational manufacturing firm with whollyowned subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the United States. Americo is traded on the NASDAQ. Americo currently has 650,000 shares outstanding. The basic operating characteristics of the various business units is as follows:

Business Performance             U.S. Parent              Brazilian Subsidiary            German Subsidiary         Chinese Subsidiary
(000s, local currency)          Company (US$)                (reais, R$)                             (euros, €)                         (yuan, ¥)

Earnings before taxes                $4,500                        R$6,250                            €4,500                          ¥2,500
(EBT)

Corporate income tax                  35%                            25%                                 40%                             30%
rate

Average exchange                       -                             R$1.80/$                           €0.7018/$                       ¥7.750/$               
rate for the period

Americo's EPS Sensitivity to Exchange Rates (A). Assume a major political crisis wracks Brazil, first affecting the value of the Brazilian reais and, subsequently, inducing an economic recession within the country. What would be the impact on Americo's consolidated EPS if the Brazilian reais were to fall in value to R$3.00/$, with all other earnings and exchange rates remaining the same?