7. Sources of uncertainty of MNC's Cash Flows Consider a U.S.-based MNC parent, Triloo Inc., that owns subsidiaries in the France, Mexico, and Australia. Suppose that the Mexican government increases corporate taxes in Mexico, which includes Mexican Triloo subsidiaries. 2 in This increase in corporate taxes in Mexico will most likely 1 the expected cash flows denoted in pesos, leading to the value of Triloo Inc. This example is best classified as a case of exposure to 3 Suppose that Triloo Inc. expects cash flows from its French subsidiaries of 18,000,000 euros at the end of the current time period. Management at Triloo forecasts the exchange rate to be $1.80 per euro at the end of this time period. This means that Triloo will have an estimated 4 in cash flows from French subsidiaries at the end of the current time period. Suppose that, after further analysis, management at Triloo now forecasts the euro to weaken against the dollar. Triloo expects the exchange rate at the end of the current time period to be $1.70 per euro. 5 in cash flows from French subsidiaries, which represents a decrease of This means that Triloo will now have an estimated 6 from the company's original forecast. 1. A) increase B) decrease 2. A) increase B) decrease 3. A) international political conditions B) international economic decisions C) exchange rate risk 4. A) $32,400,000 B) $25,920,000 C) $29,160,000 D) $22,680,000 5. A) $24,480,000 B) $27,540,000 C) $21,420,000 D) $30,600,000 6. A) $1,800,000 B) $2,340,000 C) $2,160,000 D) $1,980,000