A multinational company has two subsidiaries, one in Ireland (local currency, Irish pound) and the other in West Germany (local currency, Deutsche mark). Pro forma statements of operations indicate the following short-term financial needs for each subsidiary (in equivalent U.S. dollars): Ireland: $25 million excess cash to be invested (lent); West Germany: $10 million funds to be raised (borrowed)
The following financial data is also available: (a) Determine the effective rates of interest for Irish pound and Deutsche mark in both the Euromarket and the domestic market.
(b) Where should the funds be invested?
(c) Where should the funds be raised?

Question

A multinational company has two subsidiaries, one in Ireland (local currency, Irish pound) and the other in West Germany (local currency, Deutsche mark). Pro forma statements of operations indicate the following short-term financial needs for each subsidiary (in equivalent U.S. dollars): Ireland: $25 million excess cash to be invested (lent); West Germany: $10 million funds to be raised (borrowed)
The following financial data is also available:  (a) Determine the effective rates of interest for Irish pound and Deutsche mark in both the Euromarket and the domestic market.
(b) Where should the funds be invested?
(c) Where should the funds be raised?

Quizplus · Accepted Answer

The Answer of A multinational company has two subsidiaries, one in Ireland (local currency, Irish pound) and the other in West Germany (local currency, Deutsche mark). Pro forma statements of operations indicate the following short-term financial needs for each subsidiary (in equivalent U.S. dollars): Ireland: $25 million excess cash to be invested (lent); West Germany: $10 million funds to be raised (borrowed)
The following financial data is also available:  (a) Determine the effective rates of interest for Irish pound and Deutsche mark in both the Euromarket and the domestic market.
(b) Where should the funds be invested?
(c) Where should the funds be raised?

A Multinational Company Has Two Subsidiaries, One in Ireland (Local