STEP: 2 of 3 Suppose that Goodwin Co, a U.S. based MNC, knows that it will receive 200,000 pounds in one year. It is considering a forward put option to hedge this payable. Currency put options on the pound with expiration dates in one year currently have an exercise price of $1.20 and a premium of $0.03. Goodwin Co. wishes to use its own forecast of what the spot rate might be for the pound one year from now. The company believes there are three possible outcomes for the spot rate for the pound in one year. These three scenarios are shown in the following table: Pound Spot Rate in 1 Year Scenario Dollar Amount Received from Hedging 200,000 Pounds Option Premium Probability Net Amount Received Per Unit, Less Premium $1.17 Exercise Options? 1 $1.10 25.00% yes $0.03 $0.03 2 $1.17 50.00% $234,000 $234,000 5242,000 $1.17 $1.21 yes 3 $1.24 25.00% $0.03 no Goodwin would like to analyze the possible dollar cash inflows from not hedging the receivables. Using this strategy case, the possible dollar cash inflows are shown in the following table: Goodwin would like to analyze the possible della cash inflows from not hedging the receivables. Using this strategy case, the possible della cuch inflows are shown in the following table: Scenario 1 2 3 Probability $1.10 $1.17 Pound Spot Rate in 1 Year Total Price Paid for 200,000 Pounds 25.00% $220,000 50.00% $234,000 25.00% $248,000 $1.24 Given the information in the table, the expected value of dollar cash inflows when not hedging the receivables, but simply exchanging pounds for dollars at the spot rate in one year is for all 200,000 pounds