Suppose that Mullen 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 forward call option to hedge these payables. Currency call options on the pound with expiration dates in one year currently have 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 one year from now. The company believes there are three possible outcomes for the spot rate for the pound in one year. These three scenarios are shown in the following table: Pound Spot Rate in 1 Year Option Premium Total Price Per Unit, with Premium Exercise Options? Scenario Probability 1 25.00% $1.16 $0.03 $1.19 Total Price Paid for 100,000 Pounds $119,000 $123,000 $123,000 no 2 50.00% $1.22 $0.03 $1.23 yes 3 25.00% $1.32 $0.03 $1.23 yes Mullen would like to analyze the possible dollar cash outflows from not hedging the payables. Using this strategy case, the possible dollar cash outflows are shown in the following table: Scenario Probability 1 $1.16 $1.22 Pound Spot Rate in 1 Year Total Price Paid for 100,000 Pounds 25.00% $116,000 50.00% $122,000 25.00% $132,000 N 3 $1.32 Given the information in the table, the expected value of dollar cash outflows when not hedging payables, but simply using dollars to purchase pounds at the spot rate in one year, is for all 100,000 pounds