Using the following cost and revenue information shown for BlueSky, Inc., determine how the costs, revenue, and cash flo

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Using the following cost and revenue information shown for
BlueSky, Inc., determine
how the costs, revenue, and cash flow would be affected by three
possible exchange
rate scenarios for the New Zealand dollar (NZ$): (1) NZ$ = $.70,
(2) NZ$ = $.65, and
(3) NZ$ = $.60. (Assume U.S. sales will be unaffected by the
exchange rate.) Assume
that NZ$ earnings will be remitted to the U.S. parent at the end of
the period. Ignore
possible tax effects. Briefly comment on the nature of the
company’s exchange rate risk
exposure (8 points)
Forecasted Net Cash Flows: BlueSky Inc.
(in millions of U.S. dollars and New Zealand dollars)
U.S. Business

New Zealand
Business
Sales
$600

NZ$400
Cost of Materials 240

100
Operating Expenses 130

0
Interest Expense 80

50
Cash Flow
$150

NZ$250