Question
1.Measuring Economic Exposure. Using the following cost and revenue information shown for DeKalb, Inc., determine how the total cash flow in USD would be affected
1.Measuring Economic Exposure. Using the following cost and revenue information shown for DeKalb, Inc., determine how the total cash flow in USD would be affected by three possible exchange rate scenarios for the New Zealand dollar (NZ$): (1) NZ$ = $.50, (2) NZ$ = $.55, and (3) NZ$ = $.60.(Assume U.S. sales will be unaffected by the exchange rate.)Assume that NZ$ earnings will be remitted to the U.S. parent at the end of the period. Ignore possible tax effects. Please also calculate the economic exposure of the firm.
Forecasted Net Cash Flows:DeKalb Inc.
(in millions of U.S. dollars and New Zealand dollars)
New Zealand
U.S. BusinessBusiness
Sales$800NZ$800
Cost of Materials500 100
Operating Expenses300 0
Interest Expense100 0
Cash Flow -$100NZ$700
(can someone help me with finding economic exposure)
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