Wing Sang Jeans Limited. Wing Sang Jeans Limited of Hong Kong is completing a new assembly plant near Bangkok, Thailand. A final construction payment of 28,200,000 is due in six months. (“ ” is the symbol for Thai baht.) Wing Sang uses 15% per annum as its weighted average cost of capital. Today’s foreign exchange and interest rate quotations are as follows:

Construction payment due in 6 months (A/P, baht) 28,200,000 Present spot rate (baht/HK$) 3.8800 6-month forward rate (baht/HK$) 3.9800 Thai 6-month interest rate (per annum)
2.500%
Hong Kong 6-month interest rate (per annum) 1.750%
Wing Sang’s weighted average cost of capital (WACC) 15.000%
Wing Sang’s treasury manager, concerned about the overheating Thai economy, wonders if Wing Sang should be hedging its foreign exchange risk. The manager’s own forecast is as follows:
Expected spot rate in 6-months (baht/HK$)
Highest expected rate (reflecting a significant devaluation) 4.5000 Expected rate 4.0000 Lowest expected rate (reflecting a significant appreciation) 3.2000 What realistic alternatives are available for Wing Sang for making payments? Which method would you select and why?