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Don't have to show work Use the following to answer questions 1 - 5 ABC, Inc. does business in the US and in New Zealand.
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Use the following to answer questions 1 - 5 ABC, Inc. does business in the US and in New Zealand. Their domestic operations will produce cash flow of USD 1 million. In addition, they sell goods and services in New Zealand in the amount of NZD 500,000 and purchase supplies in New Zealand in the amount of NZD 600,000. They will continue this practice both this year and next year. They believe the exchange rate will be USD .55/NZD this year but will decline to USD.53 / NZD next year. Based upon the above information your projection for the USD cash flow of ABC NEXT YEAR would be: Impossible to determine with given information 0 USD 945,000 USD 947.000 0 USD 525,000 ABC's exchange rate exposure is to a New Zealand Dollar. O Steady O Strong O Weak O ABC has no exposure For every USD change in the value of the NZD, ABC's USD cash flow changes by USD 0 -.01: +1000 O +.01: +1000 O-02: +1000 O +.01: +2000 Suppose ABC is considering terminating purchases of supplies in New Zealand and only selling goods and services there. This would have the general effect of their exposure to Exchange Rate risk. O Negating O Decreasing Increasing There would be no impact on exchange rate risk Which of the following would be the most advisable strategy to reduce exposure exchange rate risk in New Zealand? Expand Purchasing in New Zealand O Decrease Sales Increase Sales O Borrow Funds in New Zealand Step by Step Solution
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