Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could have caused this decline in value?
A) a weaker Mexican economy
B) lower Mexican interest rates
C) depreciation of the Mexican peso
D) appreciation of the Mexican peso

Question

Quizplus · Accepted Answer

The decline in valuation of Saller Co. can be attributed to the depreciation of the Mexican peso, which reduces the value of the expected cash flows to be received in pesos from the subsidiary. The other choices are not directly related to the expected cash flows of the subsidiary and would not necessarily result in a decline in Saller Co.'s valuation.

Saller Co Has a Subsidiary in Mexico