Wing Sang Jeans Limited of Hong Kong is completing a new assembly plant near Bangkok, Thailand. A final construction payment of TBH28,200,000 is due in six months. (TBH is the code 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:

What realistic alternatives are available for Wing Sang for making payments? Which method would you select and why?

Transcribed Image Text:

Construction payment due in 28,200,000 6 months (A/P, TBH) Present spot rate (TBH = HKD1.00) 3.8800 6-month forward rate 3.9800 (TBH HKD1.00) Thai 6-month interest rate (per 2.500% annum)