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Calculate the subsidiary residual income in Canadian dollars

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Reference no: EM133139866

Question - A multinational corporation established a division in Germany as a subsidiary corporation, with an initial investment in total assets of 13 million €'s, which cost the company $19,240,000 Canadian at the time. The company sent an experienced manager to run the division, and gave her a target of 12% required rate of return, promising a bonus if this was met and/or exceeded.

After one year, the subsidiary manager was pleased to report an 18% ROI.

You have been able to determine the following data pertaining to the subsidiary:

Exchange rate at end of year was $1.42 Canadian to the Euro

Operating income was earned evenly throughout the year

The exchange rate changed approximately evenly throughout the year

Required -

1. Calculate the subsidiary's income in €'s.

2. Calculate the subsidiary's return on investment in Canadian dollars.

3. Calculate the subsidiary's residual income in Canadian dollars.

Reference no: EM133139866

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