Calculate the return on assets for 2011

Reference no: EM13174208

Murdock Company has a Spanish Subsidiary whose functional currency is the euro. Relevant translated data for the subsidiary appear below.

Date or annual period	Total Assets	Operating Income	Exchange Rate

1/1/2011	$105,000,000		$1.40/€
2011		$12,000,000	$1.20/€
12/31/2011	90,000,000		$1.00/€
2012		10,890,000	$.90/€
12/31/2012	90,000,000		$1.00/€

Required:

a. Calculate the return on assets for 2011 and 2012 using both translated ($) and euro data.

b. Explain whether translation has distorted the Spanish subsidiary's performance in 2012 compared with 2011. If so, explain how changes in the exchange rate contributed to the distortion.

Reference no: EM13174208

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