Question

Livingston Co. has a subsidiary in Korea. The subsidiary reinvests half of its net cash flows into operations and remits half to the parent. Livingston's expected cash flows from domestic business are $100,000, and the Korean subsidiary is expected to generate 100 million Korean won at the end of the year. The expected value of the won is $.0012. What are the expected dollar cash flows of Livingston Co.?

show all FORMULAS and WORK please

Answer 1

Expected Cash flow from Domestic Business = $ 100000

Korean subsidiary generates 100 million won but remits only half of the proceeds to the parent company.

So Korean subsidiary remits 50 Million Won to parent Company

Given Expected Value of 1 Won = $ 0.0012

500,00000 Won = 500,00000*$ 0.0012

= $ 60,000

Expected Value of 50 Million Won is $ 60,000

Expected Cash flow in $ = Cash fow from Domestic Business+ Cash flow from subsidiary

= $ 100000+$ 60000

= $ 160000

Hence Expected Cash flow is $ 160000

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