Assume That Mill Corporation, a U $\mu$ _t
Where the Term on the Left-Hand Side Is the Following

Multiple Choice

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: PCF_t = a₀ + a₁e_t + $\mu$ _t
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 e_t 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:

A) if the foreign currency appreciates by 1%, Mill's cash flows will decline by 2%.
B) if the foreign currency appreciates by 1%, Mill's cash flows will decline by .2%.
C) if the foreign currency depreciates by 1%, Mill's cash flows will increase by 2%.
D) if the foreign currency depreciates by 1%, Mill's cash flows will decline by 2%.
E) none of the above