Harz Co$.($a U$.$S$.$ firm$)$ has an arrangement with a Chinese company in which it purchases products from them every week at the prevailing spot rate, and then sells the products in the United States invoiced in dollars. All of its competition is from U$.$S$.$ firms that have no international business. The prices charged by Harz and its competitors will not change over the next year. Will the net cash flows generated by Harz increase, decrease, or be unaffected if the Chinese yuan depreciates over the next year? Briefly explain.

If the yuan depreciates, Harz will incur $-$Select$-$lowerhigherItem $1$ expenses when paying for the products from China. Because its competition $-$Select$-$isis notItem $2$ affected in a similar manner, the net cash flows generated by Harz Co$.$ will $-$Select$-$increasedecreasebe unaffectedItem $3.$