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(c) (i) The international model used in valuing Multinational Corporation is E(CFt)=E(CFj,t)E(ERj,t) Where, E(CFt)= Expected cash flow receipts at end of period t. CFj,t= The

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(c) (i) The international model used in valuing Multinational Corporation is E(CFt)=E(CFj,t)E(ERj,t) Where, E(CFt)= Expected cash flow receipts at end of period t. CFj,t= The amount of cash flow denominated in a particular foreign currency j at end of period t. ERj,t= The exchange rate at which the foreign currency can be converted to Kshs. at end of period t. Required:- Use the model to determine the amount received in Kenya Shillings by a Kenyan-based MNC with the following transactions: Local business cash flows of Ksh. 79,125,000; cash flows from a business in Tanzania of 139,260,000 TZ Sh.; and 102,870 Euros from a business in Sweden at the end of period t. (Assume exchange rate of 1 Ksh=18TZ Sh and 1 Euro =115Ksh) (5 Marks) (ii) Assume that the annual interest rates in the UK and in France are 4% and 6% respectively. What should the one-year forward rate of the Euro be if the Euro spot rate is 0.66 ? (2 Marks) (Total: 20 Marks)

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