Question
As well as having domestic operations, Metram Corp. has operations in Australia, including relatively modest sales, along with a significant level of purchases of Australian
As well as having domestic operations, Metram Corp. has operations in Australia, including relatively modest sales, along with a significant level of purchases of Australian materials, as well as some Australian debt paid in Australian dollars. The company wants to determine the effect of realignment on economic risk exposure under scenarios where the exchange rate ranges from US$0.70 to US$0.75 to US$0.80 per Australian dollar. U.S. sales will remain at $320.00 in the original scenario as well as in the realignment, but Australian sales will increase from AU$6.00 to AU$30.00. U.S. cost of materials will increase from $50.00 to $140.00, while Australian cost of materials will fall from AU$250.00 to AU$150.00. Operating expenses will increase modestly from US$60.00 to US$62.00. U.S. interest expenses will rise from US$3.00 to US$7.00 to reduce Australian interest expenses from AU$20.00 to AU$8.00. 1. Metram Corp. pretax cash flow originally at an exchange rate of AU$1=US$0.70 is US$ 2. Metram Corp. pretax cash flow under realignment at an exchange rate of AU$1=US$0.70 is US$ 3. Metram Corp. pretax cash flow originally at an exchange rate of AU$1=US$0.75 is US$ 4. Metram Corp. pretax cash flow under realignment at an exchange rate of AU$1=US$0.75 is US$ 5. Metram Corp. pretax cash flow originally at an exchange rate of AU$1=US$0.80 is US$ 6. Metram Corp. pretax cash flow originally at an exchange rate of AU$1=US$0.80 is US$
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