Zapata auto parts the mexican affiliate of american, Ask an Expert

Finance

Zapata Auto Parts, the Mexican affiliate of American Diversified, Inc., had the following balance sheet on January 1: The exchange rate on January 1 was Mex$10.5 $1.

a. What is Zapata’s FASB-52 peso translation exposure on January 1?

b. Suppose the exchange rate on December 31 is Mex$12. What will be Zapata’s translation loss for the year?

c. Zapata can borrow an additional Mex$15 million. What will happen to its translation exposure if it uses the funds to pay a dividend to its parent? If it uses the funds to increase its cash position?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92688897

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