Subsidiary A of Mega Corp. has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow as measured in U.S. dollars?
A) $500,000 outflow
B) $500,000 inflow
C) $275,000 inflow
D) $275,000 outflow

Question

Quizplus · Accepted Answer

We need to convert the net inflow/outflow from Australian dollars to U.S. dollars using the given exchange rate of $.55. 
For Subsidiary A: $1,000,000 x $.55 = $550,000 (net inflow in U.S. dollars)
For Subsidiary B: $1,500,000 x $.55 = $825,000 (net outflow in U.S. dollars)
Net inflow/outflow in U.S. dollars = $550,000 - $825,000 = -$275,000 (net outflow in U.S. dollars). So, the answer is (D) $275,000 outflow.

Subsidiary a of Mega Corp