Finance and accounting

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Caterpillar Inc.

Statutory Tax Rate

The statutory tax rate for the company in the US is 35%. The rate does not change and is the same for the years 2011, 2012, 2013, 2014 and 2015.

Regions/Countries the Company Operates

The Country operates in four regions. The regions are North America, Asia-Pacific, EAME and Latin America (Caterpillar, 2015). The EAME region comprises of countries in Europe, Africa and the Middle East such as the UK, Belgium, France, Germany, Italy, The Netherlands, Switzerland, Russia, Poland, South Africa and the United Arab Emirates. In Asia-Pacific region, the company has a presence in Australia, China, India, Japan, New Zealand, South Korea and Southeast Asia.

The Expected Growth Rates (in GDP) for Each Region/Country the Company Operates

The expected growth rates for the regions for 2017 are as follows (Focus Economics, 2016):

  • Asia Pacific – 5.3%
  • Latin America – 1.8%
  • North America (USA) – 1.9%
  • EAME – 2.7

Exchange Rate Forecasts for the Company’s Main Currency

The company’s main currency is the US dollar. The company, however, uses different currencies in the different regions it operates. For instance, in Latin America, the preferred currency is the Brazilian real while the company prefers the Euro for EAME region and the Japanese Yen and Australian Dollar for Asia Pacific (Caterpillar, 2015). The exchange rate forecasts for the US dollar against other currencies for the first quarter of 2017 is as follows (Pound Sterling Live, 2016):

  • USD/JPY – 118
  • EUR/USD – 1.02
  • USD/BRL – 3.20
  • AUD/USD – 0.71

NOPAT Estimations

Forecasts for Input Prices

Main Inputs

The company’s main inputs are unformed steel and iron castings and forgings (Caterpillar, 2015). The inputs are then cut and formed to shape before being machined to final specification.

Forecasts for the Input Prices

According to General Steel Buildings, the price of steel would be US$395.0 per ton in 2017. For iron, the price forecasted price for 2017 is US$54.0 per dry metric ton unit.

Effective Tax Rate for the Company

The effective tax rate represents the average rate at which the income of a company is taxed. Unlike the statutory tax rate that is based on just income, the effective tax rate involves other taxes such as excise duty that the company incurs in its operations as well as the taxes incurred in other countries where it has operations. While statutory tax rate is the fixed rate as provided by law, effective tax rate represents the actual percentage of income that the company pays as tax. The Effective tax rate for the company for the years is as follows (Caterpillar, 2015):

  • 2015 – 24.5%
  • 2014- 28%
  • 2013 – 28.5%
  • 2012 – 30.5%
  • 2011 – 26.5%

Exchange Rate Forecasts for the Company’s Main Currency

The company operates in many countries with different currencies. Therefore, it bears the risk of currency exchange rate fluctuations (Caterpillar, 2015). It, therefore, needs to hedge against such fluctuations. The company’s main currency is the US dollar. The exchange rate forecasts for the US dollar against other currencies that the company trades in for the first quarter of 2017 is as follows (Pound Sterling Live, 2016):

  • USD/JPY – 118
  • EUR/USD – 1.02
  • USD/BRL – 3.20
  • AUD/USD – 0.71

Did you like this sample?
  1. Caterpillar, 2015. Caterpillar Form 10K 2015. Washington, D.C.: United States Securities and Exchange Commission.
  2. Pound Sterling Live, 2016. Pound Sterling Live’s Currency Forecast Directory for 2016 and 2017. Pound Sterling Live, December 3, 2016. Retrieved December 30, 2016, from: https://www.poundsterlinglive.com/exchange-rate-forecasts
  3. Focus Economics, 2016. Economic Snapshot for Latin America. Focus Economics, December 7, 2016. Retrieved December 30, from: http://www.focus-economics.com/regions/latin-america
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