A petroleum company based in Kumasi plans to purchase an oil drilling equipment from a Scottish firm 5 months from now. The equipment manufacturer, in Glasgow, has indicated that the equipment price of 50,000 will remain unchanged for at least one year. However, the Kumasi firm worries that the cost of this investment may yet rise over the next 5 months if the Ghanaian cedi weakens against the sterling. To hedge this currency risk, the Kumasi firm enters into a forward contract with Barclays Bank. The contract calls for the Kumasi firm to buy 50,000 forward at a contract price of 2.30 per sterling. The contract matures in 5 months. Assume that the current spot rate is 2.29 per pound sterling. Suppose the spot rate (ST) at maturity is 2.45. I. Given the change in exchange rate, what is the ADDITIONAL COST of the equipment (in cedis) over the 5-month period? II. With the forward contract, calculate the cost of the equipment to the Kumasi firm. How much did the firm save by hedging?