Energy Power is an Australian mining company that mined/produced 2 million tonnes of coal per year both in 2019 and 2020. The company export 50% of its production to China, 30% to Japan, 10% to India, and the rest is sold in Australia. All exports are paid immediately upon sale.

1) Estimate the cash flow of the company for the full year of 2019 considering that exports are equally allocated on the first day of every month (e.g. total exports per month is 166,666 per month).

2) Estimate the cash flow of the company for the full year of 2020 considering that exports are equally allocated on the first day of every month (e.g. total exports per month is 166,666 per month).

3) Compare your results on 1 and 2 and explain the main drivers of the cash flow changes

4) Estimate cash flow from question 1, but assuming that all exports to China in the year are paid on the 1st of June 2019. Then compare these results to those obtained in question

From here questions are not related to the Energy power example

5) Assume that from 2020 to 2021 inflation increases in Australia from 1% to 4% while in other countries inflation remains unchanged for the same period.

a) Explain using the appropriate theories and/or mechanism learned in class what is expected to happen to all bilateral exchange rates with Australia.

b) Explain how higher inflation only in Australia is expected to affect the purchasing power of net exporters by 2021 (hint thinks about cost and cashflows)

7) Using data on the internet estimate the PPP and Fisher effect for the US/Euro monthly bilateral exchange rate, plot it in the chart, and explain the main drivers of this exchange rate.