Fluctuating exchange rates can alter a multinational firm's profits and losses.The Canadian corporation, Magna International, produces car parts and sells car parts in Europe.If the dollar depreciates against the euro, then Magna International's revenues from these operations should ________ and its costs from these operations should ________.

Question

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If the dollar depreciates against the euro, the euro becomes stronger relative to the dollar. This means that when Magna International converts its European revenues back to Canadian dollars, it will receive more dollars for the same amount of euros, causing revenues to rise. However, if costs are incurred in euros, they will also rise when converted to Canadian dollars.

Fluctuating Exchange Rates Can Alter a Multinational Firm's Profits and Losses.The