Question: (10 points) Suppose foreign local currency depreciation causes US parent company operating cash flow to decrease by $30,000. Old exchange rate: Local Currency 1

(10 points) Suppose foreign local currency depreciation causes US parent company operating cash flow to decrease by $30,000. Old exchange rate: Local Currency 1 = $0.25 New exchange rate: Local Currency 1 = $0.2 Suppose the US parent company raises local currency denominated debt before exchange rate changes. The debt amount is 600,000 in local currency. How much is the dollar gain from debt repayment due to the depreciation of local currency? Will this dollar gain completely offset the $30,000 dollar loss in operating cash flow?

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