ABC Inc., an exporting firm, expects to earn $20 million if the dollar depreciates, but only $10 million if the dollar appreciates. Assume that the dollar has an equal chance of appreciating or depreciating. Step one: calculate expected tax of ABC if it is operating in a foreign country that has progressive corporate taxes as shown. Corporate income tax rate =15% for the first $7,500,000. Corporate income tax rate =30% for earnings exceeding $7,500,000. Step two: ABC is considering implementing a hedging program that will eliminate their exchange rate risk: they will make certain $15 million whether or not the dollar appreciates or depreciates. How much will they save in taxes if they implement the program? $1,500,000 $4,500,000 $3,375,000 $0