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Suppose that Mulien Co, a U.S. based MNC, knows that it will need 100,000 pounds in one year in order to purchase supplies, It is

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Suppose that Mulien Co, a U.S. based MNC, knows that it will need 100,000 pounds in one year in order to purchase supplies, It is considering a ferward call option to hedge these payables. Currency calf options on the pound with expiration dates in one year currentiy hwe an exercise price of $1.20 and a premium of $0.03. Mullen Co, wishes to use its own forecast of what the spot rate might be for the pound coe year from now. The coropany believes there are three possible outcomes for the spot rate for the pound in one year. These three scenatios are shown in the following tablei Mullen would like to analyze the possible dollar cash outflows from not hedging the payablek. Using this strakegy case, the possble dolist cash outfows are shown in the following table. Given the information in the table, the expected value of dollar cash outhows when not hedging payables, but simpiy using dollars to purchase poinds at. the spot rate in one year, is

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