Assume that Mill Corporation, a U.S.-based MNC, has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements:

where the term on the left hand side is the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period t, and e_t is the percentage change in the exchange rate of the currency over period t. The regression model returns a coefficient of ₁ of 2. This indicates that

a. If the foreign currency appreciates by 1%, Mill's cash flows will decline by 2%.

b. If the foreign currency depreciates by 1%, Mill's cash flows will decline by 2%.

c. If the foreign currency depreciates by 1%, Mill's cash flows will increase by 2%.

d. If the foreign currency appreciates by 1%, Mill's cash flows will decline by 0.2%.

e. None of these choices are correct.