Dubas Co. is a U.S.-based MNC that has a subsidiary in Germany and another subsidiary in Greece. Both subsidiaries frequently remit their earnings back to the parent company. The German subsidiary generated a net outflow of €2,000,000 this year, while the Greek subsidiary generated a net inflow of €1,500,000. What is the net inflow or outflow as measured in U.S. dollars this year? The exchange rate for the euro is $1.05.
A) $3,675,000 outflow
B) $525,000 outflow
C) $525,000 inflow
D) $210,000 outflow

Question

Quizplus · Accepted Answer

First, we need to convert the amounts from euros to U.S. dollars.

The net outflow from the German subsidiary is €2,000,000, which, at an exchange rate of $1.05, is $2,100,000 (2,000,000 x 1.05 = 2,100,000).

The net inflow from the Greek subsidiary is €1,500,000, which, at an exchange rate of $1.05, is $1,575,000 (1,500,000 x 1.05 = 1,575,000).

To get the net inflow or outflow as measured in U.S. dollars, we need to find the difference between these two amounts:

Net inflow/outflow = $1,575,000 - $2,100,000 = -$525,000

Therefore, the answer is B, $525,000 outflow.

Dubas Co Is a U