For a recent month,the following payments matrix of inter-affiliate cash flows was forecasted: $$\begin{array} { l c c c c }
&&{ \text { Disbursernent From: } } \
\text { Receipts by: } & \text { France } & \text { Britain } & \text { U.S. } \
\text { France } && € 500 & € 800 \
\text { Britain } & £ 300 & & £ 400 \
\text { U.S. }& \$ 1,000 & \$ 500 &
\end{array}$$ Use multilateral netting to find the net payment from the British affiliate to the U.S.affiliate.
The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00; affiliates get paid in home currency.

Question

For a recent month,the following payments matrix of inter-affiliate cash flows was forecasted: $$\begin{array} { l c c c c } 
&&{ \text { Disbursernent From: } } \
\text { Receipts by: } & \text { France } & \text { Britain } & \text { U.S. } \
\text { France } && € 500 & € 800 \
\text { Britain }  & £ 300 & & £ 400 \
\text { U.S. }& \$ 1,000 & \$ 500 &
\end{array}$$ Use multilateral netting to find the net payment from the British affiliate to the U.S.affiliate.
The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00; affiliates get paid in home currency.

Quizplus · Accepted Answer

The net payment from the British affiliate to the U.S. affiliate is $60. This is calculated by first converting all of the payments into a single currency, such as US dollars. The spot exchange rates are $1.20 = €1.00 and $1.80 = £1.00. Therefore, the payments matrix becomes:$$\begin{array} { l c c c c } &&{ \text { Disbursernent From: } } \\text { Receipts by: } & \text { France } & \text { Britain } & \text { U.S. } \\text { France } && $600 & $960 \\text { Britain }  & $540 & & $720 \\text { U.S. }& $1,000 & $500 &\end{array}$$Next, we can use multilateral netting to find the net payment from the British affiliate to the U.S. affiliate. This is done by starting with the affiliate with the largest net payment and working our way down. In this case, the U.S. affiliate has the largest net payment, so we start with them. The U.S. affiliate has a net payment of $500. This means that they are owed $500 from the other affiliates.Next, we look at the British affiliate. The British affiliate has a net payment of $220. This means that they owe $220 to the other affiliates. We can subtract this amount from the $500 that the U.S. affiliate is owed to get a net payment of $280.Finally, we look at the French affiliate. The French affiliate has a net payment of $360. This means that they are owed $360 from the other affiliates. We can subtract this amount from the $280 that the British affiliate owes to get a net payment of $60.Therefore, the net payment from the British affiliate to the U.S. affiliate is $60.

For a Recent Month,the Following Payments Matrix of Inter-Affiliate Cash