Question: A US based multinational corporation has a subsidiary in Germany. The firm wishes to forecast the dollar value of its subsidiary's future liabilities. The

A US based multinational corporation has a subsidiary in Germany. The firm wishes to forecast the dollar

A US based multinational corporation has a subsidiary in Germany. The firm wishes to forecast the dollar value of its subsidiary's future liabilities. The quick ratio of the subsidiary is 1.4. Its current inventory, accounts receivables, and cash balances are 1,960,000 euros, 1,800,000 euros, and 540,000 euros respectively. The firm forecasts that 40% of its total current liabilities will be due 3 months from now, and 45% will be due 6 months from now. The spot euro-dollar exchange rate is 1.8 dollars per euro. The current risk-free rate of interest in Germany is 4%, and that in the United States is 3%. If interest parity holds, what is the dollar value of the firm's German liability due 3 months, and 6 months from now respectively?

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