Subsidiary A of Mega Corporation 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

First, we need to convert the Australian dollars to U.S. dollars using the expected exchange rate:

- Subsidiary A: A$1,000,000 x $.55 = $550,000 inflow
- Subsidiary B: A$1,500,000 x $.55 = $825,000 outflow

Net inflow/outflow in U.S. dollars: $550,000 - $825,000 = -$275,000

Since the result is negative, it means there is a net outflow of $275,000 in U.S. dollars. Therefore, the correct answer is D.

Subsidiary a of Mega Corporation Has Net Inflows in Australian