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Suppose that Washington Co. is a U.S. based MNC that is considering acquiring a target firm in Canada, which Washington would sell after three years.

Suppose that Washington Co. is a U.S. based MNC that is considering acquiring a target firm in Canada, which Washington would sell after three years. Suppose that not long after the valuation of the target, the economy in Canada worsens. After this economic downturn, Washington values the target again and concludes that the target's value under present economic conditions is $130. However, this economic downturn has caused the stock price of the target to fall such that the total value of all 10 million shares becomes C$112.50. Assume that the projections for the Canadian dollar exchange rate remain at $0.80 and the premium required to purchase the target is still 30.00%. Because Washington's valuation of the target is than the price it would need to pay, Washington likely seek to purchase the target

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