Measuring Economic Exposure. This information applies questions 23 and 24. Using the following cost and revenue information shown for DeKalb, Inc., determine how the costs, revenue, and cash flow would be affected by three possible exchange rate scenarios for the New Zealand dollar (NZ$): (1) NZ$ = $.50, (2) NZ$ = $.55, and (3) NZ$ = $.60. (Assume U.S. sales will be unaffected by the exchange rate.) Assume that NZ$ earnings will be remitted to the U.S. parent at the end of the period. Ignore possible tax effects.

Forecasted Net Cash Flows: DeKalb Inc. (in millions of U.S. dollars and New Zealand dollars) New Zealand U.S. Business

	US Business	New Zealand Business
Sales	800	800
Cost of Materials	500	100
Operating Expenses	300	0
Interest Expense	100	0
Cashflow	-100	700

23. Consider the three exchange rate scenarios: (1) NZ$ = $.50, (2) NZ$ = $.55, and (3) NZ$ = $.60. The combined cash flows at the consolidated firm level will be as follows:

a. $250 when NZ$ = $.50; $285 when NZ$ = $.55; $320 when NZ$ = $.60

b. $320 when NZ$ = $.50; $285 when NZ$ = $.55; $250 when NZ$ = $.60

c. $285 when NZ$ = $.50; $300 when NZ$ = $.55; $315 when NZ$ = $.60

d. $315 when NZ$ = $.50; $300 when NZ$ = $.55; $285 when NZ$ = $.60

24. DeKalb Inc. is favorably affected by a weaker New Zealand dollar value. Explain

a. True

b. False