The Irnakk Corporation Manufactures IPod Covers in Canada and China

Essay

The Irnakk Corporation manufactures iPod covers in Canada and China. The operations are organized as decentralized divisions. The following information is available for the year just ended:

The exchange rate at the time of Irnakk's investment (the end of the previous year) in China was 7.5 Chinese yuan = $1 Canadian. During the year, the yuan declined steadily in value and the exchange rate at the end of the current year was 8.5 yuan = $1 Canadian. The average exchange rate during the year was 8 yuan = $1 Canadian.
Required:
a. Calculate the Canadian Division's ROI for last year based on dollars.
b. Calculate the Chinese Division's ROI for last year based on yuan.
c. Which of Irnakk's two divisions earned the better ROI? Explain your answer, complete with supporting calculations showing the China Division ROI in Canadian dollars.