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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.