The following information applies to problems 33 through 35. St. Paul Co. does business in the United States and New Zealand. In attempting to assess its economic exposure, it compiled the following information.

a. St. Pauls U.S. sales are somewhat affected by the value of the New Zealand dollar (NZ$), because it faces competition from New Zealand exporters. It forecasts the U.S. sales based on the following three exchange rate scenarios:

Revenue from U.S. Business Exchange Rate of NZ$ (in millions) NZ$ = $.48 $100

NZ$ = .50 105

NZ$ = .54 110

b. Its New Zealand dollar revenues on sales to New Zealand invoiced in New Zealand dollars are expected to be NZ$600 million.

c. Its anticipated cost of materials is estimated at $200 million from the purchase of U.S. materials and NZ$100 million from the purchase of New Zealand materials.

d. Fixed operating expenses are estimated at $30 million.

e. Variable operating expenses are estimated at 20 percent of total sales (after including New Zealand sales, translated to a dollar amount).

f. Interest expense is estimated at $20 million on existing U.S. loans, and the company has no existing New Zealand loans.

Question 1: Forecast net cash flows for St. Paul Co. under each of the three exchange rate scenarios.

Question 2: Is the following statement true or false? St. Paul's projected net cash flows are adversely affected by a strong New Zealand dollar

Question 3. Is the following statement true or false? St. Paul Company could reduce its economic exposure without reducing its New Zealand revenues by shifting expenses from the U.S. to New Zealand.