Kittle Co. estimates its quarterly cash flows from the US and Canada under different exchange rates for the Canadian dollar. It believes the Canadian dollar will be $0.70 or $0.80. The company previously had high exposure due to low Canadian sales and high costs from Canadian suppliers. To reduce exposure, Kittle plans to increase US operating expenses and sales in Canada, and source more from US suppliers and financing. Tables show cash flows under original and new structures at $0.70 and $0.80 exchange rates. A graph plots the US dollar cash flows from both structures to compare their sensitivity to exchange rate changes.

1. THIS IS ALL THE INFO I WAS GIVEN, I HAVE NO MORE ADDITIONAL INFORMATION TO
GIVE
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 summarize in the following table. 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. For Kittle Co., a stronger Canadian dollar has a stronger influence on Canadian dollar than it
does on Canadian dollarIn the previous stage, you saw that Kittle's operating structure, with low
sales in Canada and high cost of materials from Canadian suppliers, was a source of significant
economic exposure each quarter. 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.On the following graph, use the blue points (circle symbols) to plot the U.S. dollar cash
flows from the original operating structure under both exchange rate scenarios $0.70 and $0.80.
Then use the orange points (square symbols) to plot the U.S. dollar cash flows from the proposed
operating structure under both exchange rate scenarios $0.70 and $0.80. Plot the points from left
to right in the order you want them to appear. Line segments will connect automatically. Because
the line for the proposed operating structure is , the U.S. dollar cash flows in the proposed
operating structure are sensitive to changes in the exchange rate of the Canadian dollar when
compared with the U.S. dollar cash flows of the original operating structure. Suppose 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 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).