Intro

Cargill is a U.S. firms producing cattle feed. It imports soy beans from Brazil and also sell some products there. The company expects the following cash flows:

• U.S. sales of $310 million
• U.S. cost of goods sold of $62 million
• U.S. interest expenses of $30 million
• Selling, general and administrative expenses of $20 million
• Brazilian sales of R$160 million
• Brazilian cost of goods sold of R$660 million
• Brazilian interest expenses of R$10 million

The company expects the Brazilian real exchange rate to take on one of three possible values: $0.18 per real, $0.2 per real, or $0.22 per real.

Attempt 4/10 for 10 pts.

Part1

What is the cash flow before taxes if the exchange rate turns out to be $0.22 per real (in $ million)?

Submit

Attempt 3/5 for 6 pts.

Part2

What could the company do to reduce its economic exposure to the real?

Check all that apply:

Restructure debt to increase debt payments in real

Increase imports from Brazil

Hedge its real transactions

Increase sales in Brazil

Submit

Attempt 1/10 for 10 pts.

Part3

The company decided to restructure its business to reduce its exposure to the real exchange rate. In particular, the company decided to do the following:

• Increase sales efforts to reach Brazilian cattle farmers, increasing real sales to 209 million, while also increasing selling expenses to $25.
• Buy more soy beans in America, reducing Brazilian cost of goods sold to 640 million and increasing U.S. cost of goods sold to $66 million.
• Borrow more dollars to pay off some real debt, decreasing real interest expenses to 0 milion and increasing dollar interest expenses to $32 million.

What is the cash flow before taxes if the exchange rate turns out to be $0.22 per real (in $ million)?

Please be right. I will like