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Review problem related to translation exposure

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Question: Translation Exposure. Betancourt International has operations in Arrakis. The balance sheet for this division in Arrakeen solaris shows assets of 40,000 solaris, debt in the amount of 12,500 solaris, and equity of 27,500 solaris.

a. If the current exchange ratio is 1.20 solaris per dollar, what does the balance sheet look like in dollars?

b. Assume that one year from now the balance sheet in solaris is exactly the same as at the beginning of the year. If the exchange rate is 1.30 solaris per dollar, what does the balance sheet look like in dollars now?

c. Rework part (b) assuming the exchange rate is 1.08 solaris per dollar.

Reference no: EM131733842

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