What is the cash flows in post-depreciation of sf

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Think of a Swiss subsidiary (Swiss SG) of a US firm, Newport Systems.

The current exchange rate is $0.70/SF. Swiss SG sells 5 million units @ SF15/unit. It has fixed overhead costs of SF 6 million and direct costs (labor, raw material, etc.) of SF 10/unit. The firm carries a straight line depreciation of SF 1 million each year and has a tax rate of 30%.
Now, assume that of the 5 million units, 3 million are sold at home and 2 million are exported. Prices remain sticky at home (same at SF15 / unit) but there is an increase in export prices by 33% to SF20 / unit).

Assume SF depreciates to $ 0.65 / SF. What is the Cash flows in $ post-depreciation of SF?

Reference no: EM132709998

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