STEP: 2 of 3 Suppose that Mullen Co, a U.S. based MNC, knows that it will need 300,000 pounds in one year in order to purchase supplies. It is considering forward call option to hedge these payables. Currency call options on the pound with expiration dates in one year currently have an exercise prie $1.21 and a premium of $0.03. Mullen 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: Scenario Probability 20.0096 Pound Spot Rate in 1 Year Option Premium 1 Total Price Per Unit with Premium $1.19 $1.16 Exercise Options? 2 $0.03 70.00% $1.22 Total Price paid for 300,000 Pounds $357.000 $372,000 $372,000 $0.03 MO 3 10.00% $1.24 $1.24 $0.03 Yes $1.24 yes Mullen would like to analyze the possible dollar cash outfiows from not hedging the payables. Using this strategy case, the possibile dollar canh outflows are shown in the following table: Men WOUD KE LU analyze the possible watch ULIOW TO Ty paydo. Segy , E POSSIBIL outflows are shown in the following table: 1 Scenario Probability Pound Spot Rate in 1 Year Total Price Paid for 300,000 Pounds $1.16 20.00% $348,000 $1.22 70.00% $366,000 3 10.00% $372,000 2 $1.24 Given the information in the table, the expected value of dollar cash outflows when not hedging payables, but simply using dollars to purchase pe at the spot rate in one year, is $ for all 300,000 pounds C TOTAL SCORE: 1/3