Question 1. Trion, Inc. is a US-based MNC. It plans to create and finance a subsidiary in Mexico that produces computer components at a low cost and exports them to other countries. It has no other international business. The subsidiary will manufacture computers and export them to Central American counties. The subsidiary will invoice the products in U.S. dollars. The values of the currencies in the Central American counties are expected to remain very stable against the U.S. dollar. The subsidiary will pay wages, rent, and other operating costs in Mexican pesos. The subsidiary will remit earnings monthly to the parent.

Would Trion's cash flows be favourably or unfavourably affected if the Mexican peso depreciates overtime? Assume that Trion considers partial financing of this subsidiary with peso loans from Mexican banks instead of providing all the financing with its own funds. Would this alternative form of financing increase, decrease, or have no effect on the degree to which Trion is exposed to exchange rate movements of the peso?

Explain in 150 words. NB: This is a question from International financial management course. Explain the answer in 150 words.