Assume that Mill Corporation, a U.S.-based MNC, has applied…

Assume that Mill Corporation, a U.S.-based MNC, has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements:   PCFt = a0 + a1et + mt   where the term on the left-hand side is the percentage change in inflation-adjusted cash flows measured in the firm’s home currency over period t, and et is the percentage change in the exchange rate of the currency over period t. The regression model estimates a coefficient of a1 of -2. This indicates that:

Subsidiary A of Mega Corporation has net inflows in Australi…

Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$1,500,000, while Subsidiary B has net outflows in Australian dollars of A$1,000,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow as measured in U.S. dollars?