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 $370 million
• U.S. cost of goods sold of $74 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: $0.24 per real, $0.26 per real, or $0.28 per real.

Part 1

What is the cash flow before taxes if the exchange rate turns out to be $0.24 per euro (in $ million)?

Part 2

What is the cash flow before taxes if the exchange rate turns out to be $0.26 per euro (in $ million)?

Part 3

What is the cash flow before taxes if the exchange rate turns out to be $0.28 per euro (in $ million)?