Arlington Co. expects to receive 10 million euros in each of the next 10 years. It will need to obtain 2 million Mexican pesos in each of the next 10 years.

The euro exchange rate is presently valued at \($1.38\) and is expected to depreciate by 2 percent each year over time. The peso is valued at $.13 and is expected to depreciate by 2 percent each year over time. Review the valuation equation for an MNC. Do you think that the exchange rate movements will have a favorable or unfavorable effect on the MNC?