Kittle estimates it's cash flows from both the U.S., in dollars, and Canada, in Canadian dollars, for a typical quarter. These figures are summarized in the following table. U.S. Canada Sales $310 C$3 -Cost of materials $50 C$200 -Operating expenses $60 -Interest expenses $5 C$10 Cash flows $195 -$C207 Kittle believes that the value of the Canadian dollar will be either $0.80 or $0.90 and seeks to analyze its cash flows under each of these scenarios. The following table shows Kittle's cash flows under each of these exchange rates. Sales (1) U.S. Sales (2) Canadian Sales (3) Total sales in U.S. $ Cost of Materials and Operating Expenses (4) U.S. Cost of Materials (5) Canadian Cost of Materials (6) Total Cost of Materials in U.S. $ (7) Operating Expenses Interest Expense Exchange Rate Scenario C$1=$0.80 Exchange Rate Scenario C$1=$0.90 (Millions) (Millions) $310 $310 C$3 X $0.80 = $2.40 C$3 X $0.90 = $2.70 $312.40 $312.70 $50 $50 C$200 X $0.80 = $160.00 C$200 X $0.90 = $180.00 $210.00 $60 $230.00 $60 Kittle believes that the value of the Canadian dollar will be either $0.80 or $0.90 and seeks to analyze its cash flows under each of these scenarios. The following table shows Kittle's cash flows under each of these exchange rates. Sales (1) U.S. Sales (2) Canadian Sales (3) Total sales in U.S. $ Cost of Materials and Operating Expenses (4) U.S. Cost of Materials (5) Canadian Cost of Materials (6) Total Cost of Materials in U.S. $ (7) Operating Expenses Interest Expense (8) U.S. Interest Expense (9) Canadian Interest Expense (10) Total Interest Expenses in U.S. Cash Flows in U.S.$ before Taxes Exchange Rate Scenario C$1=$0.80 Exchange Rate Scenario C$1=$0.90 (Millions) (Millions) $310 $310 C$3 X $0.80 $2.40 = C$3 X $0.90 = $2.70 $312.40 $312.70 $50 $50 C$200 X $0.80 = $160.00 C$200 X $0.90 = $180.00 $210.00 $60 $230.00 $60 $5 C$10 X $0.80: = $8.00 $13.00 $29.40 For Kittle Co., a stronger Canadian dollar has a stronger influence on Canadian dollar $5 C$10 X $0.90 = $9.00 $14.00 $8.70 inflows than it does on Canadian dollar

Kittle estimates it's cash flows from both the U.S., in dollars, and Canada, in Canadian dollars, for a typical quarter. These figures are summarized in the following table. U.S. Canada Sales $310 C$3 -Cost of materials $50 C$200 -Operating expenses $60 -Interest expenses $5 C$10 Cash flows $195 -$C207 Kittle believes that the value of the Canadian dollar will be either $0.80 or $0.90 and seeks to analyze its cash flows under each of these scenarios. The following table shows Kittle's cash flows under each of these exchange rates. Sales (1) U.S. Sales (2) Canadian Sales (3) Total sales in U.S. $ Cost of Materials and Operating Expenses (4) U.S. Cost of Materials (5) Canadian Cost of Materials (6) Total Cost of Materials in U.S. $ (7) Operating Expenses Interest Expense Exchange Rate Scenario C$1=$0.80 Exchange Rate Scenario C$1=$0.90 (Millions) (Millions) $310 $310 C$3 X $0.80 = $2.40 C$3 X $0.90 = $2.70 $312.40 $312.70 $50 $50 C$200 X $0.80 = $160.00 C$200 X $0.90 = $180.00 $210.00 $60 $230.00 $60 Kittle believes that the value of the Canadian dollar will be either $0.80 or $0.90 and seeks to analyze its cash flows under each of these scenarios. The following table shows Kittle's cash flows under each of these exchange rates. Sales (1) U.S. Sales (2) Canadian Sales (3) Total sales in U.S. $ Cost of Materials and Operating Expenses (4) U.S. Cost of Materials (5) Canadian Cost of Materials (6) Total Cost of Materials in U.S. $ (7) Operating Expenses Interest Expense (8) U.S. Interest Expense (9) Canadian Interest Expense (10) Total Interest Expenses in U.S. Cash Flows in U.S.$ before Taxes Exchange Rate Scenario C$1=$0.80 Exchange Rate Scenario C$1=$0.90 (Millions) (Millions) $310 $310 C$3 X $0.80 $2.40 = C$3 X $0.90 = $2.70 $312.40 $312.70 $50 $50 C$200 X $0.80 = $160.00 C$200 X $0.90 = $180.00 $210.00 $60 $230.00 $60 $5 C$10 X $0.80: = $8.00 $13.00 $29.40 For Kittle Co., a stronger Canadian dollar has a stronger influence on Canadian dollar $5 C$10 X $0.90 = $9.00 $14.00 $8.70 inflows than it does on Canadian dollar

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 3BIC

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