5. Problem 12.11 (Managing Economic Exposure) Algo St. Paul Co. does business in the United States and New Zealand. In attempting to assess its economic exposure, it compiled the following information. three exchange rate scenarios: b. Its New Zealand dollar revenues on sales to New Zealand invoiced in New Zealand dollars are expected to be NZ\$600 million. c. Its anticipated cost of materials is estimated at $210 million from the purchase of U.S. materials and NZ\$110 million from the purchase of New Zealand materials. d. Fixed operating expenses are estimated at $20 million. e. Variable operating expenses are estimated at 15 percent of total sales (after including New Zealand sales, translated to a dollar amount). f. Interest expense is estimated at $10 million on existing U.S. loans, and the company has no existing New Zealand loans. answers to one decimal place. Explain how St. Paul's net cash flows are affected by possible exchange rate movements. The forecasted income statements show that St. Paul Company is -Select- ^ affected by a strong New Zealand dollar. Explain how it can restructure its operations to reduce the sensitivity of its net cash flows to exchange rate movements without reducing its volume of business in New Zealand. St. Paul Company could reduce its economic exposure without reducing its New Zealand revenues by shifting expenses from to