2. Uncertainty Surrounding an MNCs Cash Flows

a. Assume that Bangor Co. (a U.S. firm) knows that it will have cash inflows of $800,000 from domestic operations, cash inflows of 600,000 Swiss francs due to exports to Swiss operations, and cash outflows of 700,000 Swiss francs at the end of the year. While the future value of Swiss franc is uncertain because it fluctuates, your best guess is that the Swiss francs value will be $1.15 at the end this year. What are the expected dollar cash flows of Bangor Co.? (1 point)

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 $800,000 from domestic operations, cash inflows of 300,000 Swiss francs due to exports to Swiss operations, and cash outflows of 600,000 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. (1 point)

3. What are the three theories of international business? What are the primary reasons for international business according to each theory? (1 point)