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  • QA-26. Impact of Uncertainty On MNC Value

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    Uncertainty surrounding the future value of the Canadian dollar increases the risk for Minneapolis Co., an exporter to Canada. This increased risk could raise the company's cost of capital and lower its valuation, as higher risk means investors require greater returns. The event makes the company's future dollar cash flows from Canadian sales more uncertain.

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    QA-26. Impact of Uncertainty on MNC Value

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    QA-26. Impact of Uncertainty on MNC Value

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    Uncertainty surrounding the future value of the Canadian dollar increases the risk for Minneapolis Co., an exporter to Canada. This increased risk could raise the company's cost of capital and lower its valuation, as higher risk means investors require greater returns. The event makes the company's future dollar cash flows from Canadian sales more uncertain.

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    248 visualizzazioni1 pagina

    QA-26. Impact of Uncertainty On MNC Value

    Caricato da

    hy_saingheng_7602609
    Uncertainty surrounding the future value of the Canadian dollar increases the risk for Minneapolis Co., an exporter to Canada. This increased risk could raise the company's cost of capital and lower its valuation, as higher risk means investors require greater returns. The event makes the company's future dollar cash flows from Canadian sales more uncertain.

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    © All Rights Reserved
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    26. Impact of Uncertainty on MNC Value. Minneapolis Co.

    is a major exporter of products to


    Canada. Today, an event occurred that has increased the uncertainty surrounding the
    Canadian dollars future value over the long term. Explain how this event can affect the
    valuation of Minneapolis Co.
    ANSWER: The future dollar cash flows of Minneapolis Co. are now more uncertain, which
    can increase its cost of capital (the denominator of the MNC valuation equation), and reduce
    its valuation.

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