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.

Kittle believes that the value of the Canadian dollar will be either $$0\mathrm{.}70$ or $$0\mathrm{.}80$ 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.

For Kittle Co$.,$ a stronger Canadian dollar has a stronger influence on Canadian dollar

than it does on Canadian dollar Because of this, Kittle has decided to restructure it's operating structure. The largest part of the restructure involves an increase in U$.$S$.$ operating

expense in order to pay for efforts to increase Canadian sales, while also ordering more supplies from U$.$S$.$ suppliers instead of Canadian

suppliers. This restructuring also includes using more U$.$S$.$ sources for financing instead of Canadian sources.

The following table shows Kittle's cash flows under each of these exchange rates and operating structures. Columns $(1)$ and $(3)$ represent the

original operating structures, while columns $(2)$ and $(4)$ represent the new, proposed operating structure.

Use the table to answer the questions that follow.

Cost of Materials and

Operating Expenses

before Taxes uppose that Kittle Co$,$ a U$.$S$.-$based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic

xposure of its cash flows. Kittle wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar $($the only

reign currency in which it deals$).$Kittle estimates it$$s cash flows from both the U$.$S$.,$ in dollars, and Canada, in Canadian dollars, for a typical quarter. These figures are summarized in the following table. U$.$S$.$ Canada Sales $$325$ C$$3$Cost of materials $$55$ C$$200$Operating expenses $$65$Interest expenses $$3$ C$$10$ Cash flows $$202-$$C$207$