20. TEK-British Telecom Bidding. TEK has made a 1,500,000 bid to supply and install a network moni- toring system for British Telecom in Manchester, UK. The bid is good for 30 days at which time the winner of the bidding process will be announced. Other bidders are expected to be Agilent, Siemens, and at least two British firms. If TEK wins the bid it will have 60 days to build and install the system. During this 90-day period the 1,500,000 will be accounted for as backlog. Upon delivery and testing of the system British Telecom will make full payment 30 days later. During this month TEK will account for the 1,500,000 as an account receivable. Barclay's Bank (U.K.) has offered TEK the following quotes:

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Spot rate: One-month forward rate: $1.8418/ 1:8368/ Four-month forward rate: 1.8268/f One-month E Investment rate 4.000% per year One-month borrowing rate: 6.500% per year Four-month f investment rate 4.125% per year Four-month borrowing rate: 6.500% per year One-month put option on pound (51.85/ strike) S0.006/E premium Four-month put option on pound ($1.85/ strike) $0.012/ premium TEK's weighted average cost of capital 9.80%