The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____.
A) decrease; appreciate
B) increase; appreciate
C) decrease; depreciate
D) increase; depreciate

Question

Quizplus · Accepted Answer

When the expected cash flows from foreign increase, it means that the MNC is generating more profits and hence investors will value the company higher. Additionally, when foreign currencies denominating these cash flows are expected to appreciate, it means that the MNC will be able to convert these profits into more valuable currency when it repatriates them back to the domestic country. This also adds value to the MNC and hence its valuation should rise.

The Valuation of an MNC Should Rise When an Event