Consider a U.S.-based MNC with a wholly-owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct?

Question

Quizplus · Accepted Answer

A depreciation of the dollar against the euro means that the euro is stronger relative to the dollar. This can improve the competitive position of the subsidiary in the European market, potentially altering cash flows. Additionally, when the euro cash flows are converted to dollars, they will result in a higher dollar amount due to the stronger euro.