Consider a U.S.-based MNC parent, Triloo Inc., that owns subsidiaries in the France, Mexico, and Australia.

Suppose that the economy in Mexico strengthens, leading to a higher national income.

This higher national income in Mexico will most likely decrease the demand for Triloo products, leading to higher expected cash flows denoted in pesos and a decrease in the value of Triloo Inc. This example is best classified as a case of exposure to international economic conditions .

Suppose that Triloo Inc. expects cash flows from its French subsidiaries of 11,000,000 euros at the end of the current time period. Management at Triloo forecasts the exchange rate to be $1.90 per euro at the end of this time period.

This means that Triloo will have an estimated $22,990,000 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 $1.80 per euro.

This means that Triloo will now have an estimated $13,860,000 in cash flows from French subsidiaries, which represents a decrease of $1,100,000 from the companys original forecast.