Question $3$

$(27$ marks$)$

Greeley plc$.$ is a U$.$S$.-$based multinational firm $($MNF$)$ that purchases most of its materials from Australia and generates a small portion of its sales from exporting to Australia. Its U$.$S$.$ sales are denominated in U$.$S$.$ dollars, while its Australian sales are denominated in Australian dollars $($AUD$).$ Using the cost and revenue information shown for Greeley plc$.$ in Exhibit $1$ determine how the costs, revenue, and cash flow items would be affected by three possible exchange rates for the Australian dollar: $(1)$ AUD$=$ US$$0\mathrm{.}75,(2)$ AUD $=$ US$$0\mathrm{.}80,$ or $(3)AD=US$$$0\mathrm{.}85.($Assume U$.$S$.$ sales will be unaffected by the exchange rate.$)$ Assume that Australian AUD earnings will be remitted to the U$.$S$.$ parent at the end of the period. Ignore possible tax effects.

Exhibit $1-$ Estimated Sales and Expenses for Greeley's U$.$S$.$ and Australian Business Segments $($in Millions$)$

$\backslash$table$[[,\backslash$table$[[$U$.$S$.],[$Business$]],\backslash$table$[[$Australian$],[$Business$]]],[$Sales$,$$$320,$AUD $4],[$Cost of materials,$$50,$AUD $200],[$Operating expenses,$$60,-],[$Interest expenses,$$3,$AUD $10],[$Cash flows,$$207,-$AUD $206]]$