An MNCs motives for forecasting exchange rates are summarized in the diagram. The motives are distinguished according to whether they can enhance the MNCs value by influencing its cash flows or its cost of capital.

Using the given information, explain how the firm's value is increased.

Exhibit 9.1 Corporate Motives for Forecasting Exchange Rates Decide whether to Hedge Foreign Currency Cash Flows Decide whether to Invest in Foreign Projects Dollar Cash Flows Forecasting Exchange Rates Decide whether Foreign Subsidiaries Should Remit Earnings Value of the Firm Decide whether to Obtain Financing in Foreign Currencies I Cost of Capital