a. Assume that Bangor Co. (a U.S. firm) knows that it will have cash inflows of $900,000 from domestic operations, cash inflows of 200,000 Swiss francs resulting from exports to Swiss operations, and cash outflows of 500,000 Swiss francs at the end of the year. Although the future value of the Swiss franc is uncertain, your best guess is that it will be worth $1.10 at the end of this year. What are the expected dollar cash flows of Bangor Co?
b. Assume that Concord Co. (a U.S. firm) is in the same industry as Bangor Co. There is no political risk that could have any impact on the cash flows of either firm. Concord Co. knows that it will have cash inflows of $900,000 from domestic operations, cash inflows of 700,000 Swiss francs from exports to Swiss operations, and cash outflows of 800,000 Swiss francs at the end of the year. Is the valuation of the total cash flows of Concord Co. more uncertain or less uncertain than the total cash flows of Bangor Co.? Explain briefly.