10.14 Micca Metals, Inc. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific pre- cious metals and materials that are used in a variety of pigment applications in many industries includ- ing cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 6,000,000 dirhams, payable in six months. Six-month call options on 6,000,000 dirhams at an exercise price of 10.00 dirhams per dollar are avail- able from Bank Al-Maghrub at a premium of 2%. Six-month put options on 6,000,000 dirhams at an exercise price of 10.00 dirhams per dollar are avail- able at a premium of 3%. Compare and contrast alternative ways that Micca might hedge its for- eign exchange transaction exposure. What is your recommendation? Value 6,000,000 Assumption Shipment of phosphates from Morocco, Moroccan dirhams Micca's cost of capital (WACC) Spot exchange rate, dirhams/$ 6-month forward rate, dirhams/$ 14.000% 10.00 10.40 United States Morocco 6.000% 8.000% Six-month interest rate for borrowing (per annum) Six-month interest rate for investing (per annum) 5.000% 7000%