(a)ABC Ltd is foreign subsidiary of cadbury's that is based in Kenya and as at 30 th...
Question:
(a)ABC Ltd is foreign subsidiary of cadbury's that is based in Kenya and as at 30th June 2016 the firm showed the following balance sheet when the exchange rate was Kshs
$Million
Non-current assets
Accounts receivable
Inventory
Cash and bank
Bank overdraft
Accounts payable
Long term loan
Ordinary share capital
6,000
2,000
6,300
4,500
18,800
600
3,000
5,400
9,800
18,800
Required:
Translate the balance sheet of ABC Ltd using
i.Current/non-current method(5 Marks)
ii.Current rate method(5 Marks)
(b)The beginning of year consumer price index (CPI) of Kenya and Uganda as follows: in Kenya 167 and in Uganda 158. After 2 years the CPI in Kenya is expected to be 180 while in Uganda it is expected to be 165. The spot rate between the two countries is Ush33.1./ksh
Required:
i.Compute the inflation rates in Kenya and Uganda
ii.Determine the future rate (5 Marks)
(c)Suppose the interest rates in Kenya are 12% and in Tanzania are 15% while the spot rate is Tsh 21.7/ks
Required:
Compute the expected spot rate and the end of 2 years(3 Marks)
(d)Distinguish between international fisher effect and interest rate parity (2 Marks)