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

Forecasted Net Cash Flows: TWD Inc.

(in millions of U.S. dollars and New Zealand dollars)

New Zealand

U.S. Business Business

Sales $700 NZ$400

Cost of Materials 500 200

Operating Expenses 150 0

Interest Expense 100 0

Cash flow $ 50 NZ$200