Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million.

Question

Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater's "earnings before interest and taxes" would ____ if the Canadian dollar appreciates; the dollar value of Whitewater's cash flows would ____ if the Canadian dollar appreciates.
a. increase; increase
b. decrease; increase
c. decrease; decrease
d. increase; decrease
e. increase; be unaffected

please explain how?

Explanation / Answer

would decrease if the Canadian dollar appreciates; because it have adverse effect the dollar value of Whitewater's cash flows would decrease because this too has adverse effect if the Canadian dollar appreciates us will depreciate if Canadian dollar depreciate us will appreciates.

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