2) Using the following cost and revenue information shown for Walmart, 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: Walmart. (in millions of U.S. dollars and New Zealand dollars) U.S. Business New Zealand Business
2) Using the following cost and revenue information shown for Walmart, 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: Walmart. (in millions of U.S. dollars and New Zealand dollars) U.S. Business New Zealand Business
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Transcribed Image Text:2) Using the following cost and revenue information shown for Walmart, 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: Walmart.
(in millions of U.S. dollars and New Zealand dollars)
Sales
Cost of Materials
Operating Expenses
Interest Expense
Cash Flow
U.S. Business
$800
500
300
100
-$100
New Zealand
Business
NZ$800
100
0
0
NZ$700
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