Question 4 Centurion Ltd. and Allied Tech Ltd. are Singapore-based firms with subsidiaries in China that distribute precision metal parts, tools and supplies to customers throughout China. Both their subsidiaries purchase the products at cost and sell the products at markups. The other operating costs of the subsidiaries are very low. Centurion has a research and development center in Singapore that focuses on improving its production technology. Allied Tech has a similar center based in China. Each firm subsidizes its respective research and development center on an annual basis. Which firm is subject to a higher degree of economic exposure? Explain. (a) (6 marks) (b) To ascertain the exact nature of the economic exposure of these firms, you collected the following data on changes in their subsidiaries' cash flows and the value of the Chinese yuan (CNY) over the last eight quarters: Percentage Change (%) Centurion Subsidiary's Cash Flow Allied Tech Quarter Subsidiary's Cash Flow Value of CNY -4 -1 0 1 -2 0 -1 2 -3 -6 -1 3 -2 -5 0 4 2 1 5 0 -1 1 6 2 1 2 7 5 1 8 How would you go about to determine whether the difference in economic exposure of these firms is significant? (8 marks) (TOTAL: 14 marks)