Hudson Co$.,$ a U$.$S$.$ firm, has a subsidiary in Mexico, where political risk has recently decreased. Hudson's best guess of its future peso cash flows to be recerved nas not

changed. Explain how its valuation has changed as a result of the decrease in political risk.

The valuation of the MNC is the present value of expected cash flows. The decrease in risk results in a

expected return, which

the present value of

the expected future cash flows, and therefore its valuation has

$.$