Answer to Question #289778 in Finance for jan

Question

Plak Co. of Chicago has several European subsidiaries that remit earnings to it each year. Explain how appreciation of the euro (the currency used in many European countries) would affect Plak’s valuation?

Answer 1

This appreciation increases the exchange rate and hence the valuation of Plak as it increases the value of dollar for Plak and hence the cash flow value remitted from the European subsidiaries.