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16 April, 10:19

6. Bronco Co. is a U. S.-based MNC that has subsidiaries in Spain and Germany. Both subsidiaries frequently remit their earnings back to the parent company. The Spain subsidiary generated a net outflow of €5,000,000 this year, while the German subsidiary generated a net inflow of €4,500,000. What is the net inflow or outflow as measured in U. S. dollars this year? The exchange rate for the euro is $1.159.

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  1. 16 April, 10:36
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    Cash outflow of $579,500

    Explanation:

    Net cash flow is the sum of all cash inflow and outflows of the company.

    In this question the company has cash outflow from Spain and inflow from Germany.

    As per given data

    Cash flow from Spain subsidiary = €5,000,000 outflow

    Cash flow from German subsidiary = €4,500,000 inflow

    Net cash flow to parent company = - €5,000,000 + €4,500,000

    Net cash flow to parent company = - €500,000

    The currency is converted using the exchange rate of $1.159 per euro.

    Net cash Flow in U. S. dollars = - €500,000 x $1.159 per euro

    Net cash Flow in U. S. dollars = - $579,500
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