Question

After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends...

After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be $1.37 per pound, and the pound is expected to depreciate 2% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 12% a year indefinitely. The parent U.S. corporation owns 9 million shares of the subsidiary. What is the present value in dollars of its equity ownership of the subsidiary? Assume a cost of equity capital of 14% for the subsidiary. Do not round intermediate calculations. Round your answer to the nearest dollar.

$ _____________________

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends...
After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be $1.33 per pound, and the pound is expected to depreciate 3% against the dollar each year for an indefinite period. The dividend (in pounds) is expected to grow at 8% a year indefinitely. The parent U.S. corporation owns 9 million shares of the...
Santana Music is a​ U.S.-based MNC whose foreign subsidiary had pretax income of $58,000​; all​ after-tax...
Santana Music is a​ U.S.-based MNC whose foreign subsidiary had pretax income of $58,000​; all​ after-tax income is available in the form of dividends to the parent company. The local tax rate is 41%​, he foreign dividend withholding tax rate is5.2%​, and the U.S. tax rate is 32%. Compare the net funds available to the parent corporation ​(a) if foreign taxes cannot be applied as a credit against the U.S. tax liability and ​(b) if they can. The dividend available...
Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit of...
Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit of its parent company. When the exchange rate was $1.30 per one British Pound Sterling (£), Meadows Limited purchased Inventory for £2,100 pounds. Meadows resells one-third of the inventory for £900 when the exchange rate was $1.26 per Pound Sterling and another one-third for £900 when the exchange rate was $1.28 per Pound Sterling. The parent company applies the temporal method in its process of...
Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit of...
Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit of its parent company. When the exchange rate was $1.30 per one British Pound Sterling (£), Meadows Limited purchased Inventory for £2,100 pounds. Meadows resells one-third of the inventory for £900 when the exchange rate was $1.26 per Pound Sterling and another one-third for £900 when the exchange rate was $1.28 per Pound Sterling. The parent company applies the temporal method in its process of...
Suppose the direct foreign exchange rates in U.S. dollars are 1 British pound = $ 1.20...
Suppose the direct foreign exchange rates in U.S. dollars are 1 British pound = $ 1.20 1 Canadian dollar = $ 0.68 Required: a. What are the indirect exchange rates for the British pound and the Canadian dollar? (Round your answers to 4 decimal places.) 1 USD British pounds 1 USD Canadian dollars b. How many pounds must a British company pay to purchase goods costing $10,000 from a U.S. company? (Do not round intermediate calculations.) British pounds c.How many...
Q24 Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit...
Q24 Meadows Limited, a foreign subsidiary of U.S. based Meadows Inc. operates primarily for the benefit of its parent company. When the exchange rate was $1.30 per one British Pound Sterling (£), Meadows Limited purchased Inventory for £2,100 pounds. Meadows resells one-third of the inventory for £900 when the exchange rate was $1.26 per Pound Sterling and another one-third for £900 when the exchange rate was $1.28 per Pound Sterling. The parent company applies the temporal method in its process...
Crown Co. is expecting to receive 100,000 British pounds in one year. Crown expects the spot...
Crown Co. is expecting to receive 100,000 British pounds in one year. Crown expects the spot rate of British pound to be $1.49 in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53 respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. Assume there are no...
Q23 Wiese Limited, a foreign subsidiary of U.S. based Wald Inc. operates primarily economically independent from...
Q23 Wiese Limited, a foreign subsidiary of U.S. based Wald Inc. operates primarily economically independent from its parent company. When the exchange rate was $1.30 per one British Pound Sterling (£), Wald Limited purchased Inventory for £2,100 pounds. Wald resells one-third of the inventory for £900 when the exchange rate was $1.26 per Pound Sterling and another one-third for £900 when the exchange rate was $1.28 per Pound Sterling. At the end of the reporting period, the exchange rate is...
Suppose it takes 1.3156 U.S. dollars today to purchase one British pound in the foreign exchange...
Suppose it takes 1.3156 U.S. dollars today to purchase one British pound in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 8% against the pound over the next 30 days. How many dollars will a pound buy in 30 days? Enter your answer rounded to four decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.45678 then enter as 12300.4568 in the answer box.
A U.S. firm expects that the British pound will depreciate from $1.70 to $1.68 in one...
A U.S. firm expects that the British pound will depreciate from $1.70 to $1.68 in one year. The firm has no spare cash, but it could borrow either 1 million dollars at 6% or 1 million pounds at 5% for a year. Determine the profit or loss for the firm if they pursue a strategy to capitalize on the expected depreciation of the pound.