Simplify the following set of intra company cash flows for this U.S.firm. Use the following exchange rates:
$$\begin{array} { r l l }
£ 1.00 & = & \$ 2.00 \
€ 1.00 & = & \$ 1.50 \
\text { SFr } 1.00 & = & \$ 0.80
\end{array}$$ The fewest number of intra-affiliate cash flows is

Question

Simplify the following set of intra company cash flows for this U.S.firm. Use the following exchange rates:
$$\begin{array} { r l l } 
 £ 1.00 & = & \$ 2.00 \
€ 1.00 & = & \$ 1.50 \
\text { SFr } 1.00 & = & \$ 0.80
\end{array}$$ The fewest number of intra-affiliate cash flows is

Quizplus · Accepted Answer

To simplify the cash flows, we need to convert all the currencies into a common currency, which in this case is USD. The cash flows can then be grouped by currency. After conversion, we have the following cash flows:

USD to EUR: $250,000
EUR to USD: $300,000
USD to GBP: $100,000
GBP to USD: $200,000
USD to CHF: $50,000
CHF to USD: $75,000
EUR to GBP: £100,000
GBP to EUR: €150,000
EUR to CHF: SFr 200,000
CHF to EUR: €125,000

We can simplify the cash flows by eliminating the intermediate currencies (EUR and GBP) and converting them directly to USD. This gives us the following cash flows:

USD to GBP: $100,000
GBP to USD: $200,000
USD to CHF: $50,000
CHF to USD: $75,000
EUR to CHF: SFr 200,000
CHF to EUR: €125,000
EUR to USD: $450,000

Therefore, the fewest number of intra-affiliate cash flows is 2: EUR to CHF, and CHF to EUR.

Simplify the Following Set of Intra Company Cash Flows for This