BioTron Medical, Inc. Brent Bush, CFO of a medical device distributor, BioTron Medical, Inc., was approached by
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BioTron Medical, Inc. Brent Bush, CFO of a medical device distributor, BioTron Medical, Inc., was approached by a Japanese customer, Numata, with a proposal to pay cash (in yen) for its typical orders of ¥12,500,000 every other month if it were given a 4.5% discount. Numata’s current terms are 30 days with no discounts. Using the following quotes and estimated cost of capital for Numata, Bush will compare the proposal with covering yen payments with forward contracts. Should Brent Bush accept Numata’s proposal?
Spot rate: ¥111.40/$
30-day forward rate: ¥111.00/$
90-day forward rate: ¥110.40/$
180-day forward rate: ¥109.20/$
Numata’s WACC 8.850%
BioTron’s WACC 9.200%
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Related Book For
Fundamentals Of Multinational Finance
ISBN: 9781292215211
6th Global Edition
Authors: Michael Moffett
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