Assume that Alpine Co$.$ is a U$.$S$.$ firm that has direct foreign investment in Brazil as a result establishing a subsidiary there. Political conditions have changed in Brazil, but the best guess by investors of the future cash flows per year for Alpine Co$.$ has not changed. Yet there is more uncertainty surrounding the best guess of Alpine$$s cash flows. In other words, the distribution of possible outcomes above and below the best guess has expanded. Would the change in uncertainty cause the prevailing value of Alpine Co$.$ to increase, decrease, or remain unchanged? Briefly explain.

The increase in uncertainty surrounding cash flows would cause the prevailing value of Alpine Co$.$ to

decrease

$,$ because the required rate of return by investors would

increase

$.$