SETTO Suppose that Kittle Co, a U.S.-based MNC that both purchases supplies from Canada and sells experts in Canada, is seeking to measure the economic exposure of its cash flows. Kittle wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only foreign 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 C55 Sales $315 $50 -Cost of materials C$150 560 Operating expenses -Interest expenses Cash flows $3 C$10 $202 -5C155 ittle believes that the value of the Canadian dollar will be either $0.70 or $0.80 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. Kittle believes that the value of the Canadian dollar will be either $0.70 or $0.80 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. Exchange Rate Scenario C$1=$0.70 (Millions) Exchange Rate Scenario C$1=$0.80 (Millions) Sales $315 CS5 X $0.70 - $3.50 $318.50 $315 C$5 X $0.80 - $4.00 $319.00 $50 (1) U.S. Sales (2) Canadian Sales (3) Total sales in U.S. Cost of Materials and Operating Expenses (4) U.S. Cost of Materials (5) Canadian Cost of Materials (6) Total Cost of Materials in U.S. S (7) Operating Expenses Interest Expense (8) U.S. Interest Expense (9) Canadian Interest Expense (10) Total Interest Expenses in U.S. Cash Flows in U.S.$ before Taxes C$150 X $0.70 - $105.00 $155.00 $50 C$150 X $0.80 - $120.00 $170.00 $60 $60 53 CS10 X $0.70 = $7.00 $3 CS10 X $0.80 - $8.00 $11.00 $10.00 $93.50 $78.00 $315 IS CSS X $0.70 - $3.50 $310.50 C$S X 10.00 - 14.00 $319.00 150 (1) Sales (2) Canadian Sale (2) 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 C$150 X $0.70 - $105.00 $155.00 360 $50 C$150 X $0.00 - $120.00 $170.00 160 $3 C$10 X $0.70 - $7.00 $10.00 $93.50 $3 C$10 X $0.80 - $8.00 $11.00 $78.00 than it does on Canadian dollar For Kittle Co., a stronger Canadian dollar has a stronger influence on Canadian dollar outflows D TOTAL SCORE: 0/3 inflows $313.50 $319.00 Cast of Materials and Operating Expenses (4) U.S. Cont of Material (5) Canadian Cost of Materials (6) Total cost of Materials in US. (7) Operating Expenses Interest Expense (0) U.S. Interest Expense (9) Canadian Interest Expense (10) Total Interest Expenses in U.S. Cash Flows in U.S.S before Taxes $50 C$150 X $0.00 $120.00 $170.00 C$150 X $0.70 - $105.00 $155.00 $60 $3 C$10 X 50.70 - $7.00 $10.00 $93.50 $3 C510 X 10.00 - $8.00 $11.00 $78.00 For Kittie Co, a stronger Canadian dollar has a stronger influence on Canadian dollar than it does on Canadian dollar inflows TOTAL SCORE: 0/3 1 outflows