Question: Tierra Technology, Inc. Tierra Technology, Inc., manufactures basic farm equipment in China, Spain, and Iowa. Each subsidiary has monthly unsettled balances due to or from other subsidiaries. At the end of December, unsettled intracompany debts in U.S. dollars were as follows:
a. How could Tierra Technology net these intracompany debts? How much would be saved in transaction expenses over the no-netting alternative?
b. Before settling the above accounts, Tierra Technology decides to invest $6,000,000 of parent funds in a new farm equipment manufacturing plant in the new Free Industrial Zone at Subic Bay, The Philippines. How can this decision be incorporated into the settlement process? What would be total bank charges? Explain.