A company generates the following operating cash flows from a foreign investment Year 1 B$ 600 Year 2 B$ 800 The home currency of the company is A$. The company has been valued using a present value of cashflow approach. The valuation is based on the assumption that the exchange rate will be constant at B$4.00 = A$1. A discount rate of 10 per cent has been used. The Year 1 discount factor is 0.909 and the Year 2 discount factor is 0.826. If the A$ weakens by 20 per cent each year, what will be the impact on the present value of the cash flows from the foreign investment? Solution A. A 42 per cent increase in the present value of the cash flows. B. A 42 per cent decrease in the present value of the cash flows. C. A 25 per cent increase in the present value of the cash flows. D. A 25 per cent decrease in the present value of the cash flows.