An Australian forestry company, Australian Wood Chip Ltd (AWC Ltd), has signed a contract to sell USD 500,000 p.a. of wood pulp to Japan in 6 months time. The cost to AWC to prepare and sell the wood is AUD 300,000. The company wants to hedge its foreign currency risk. Its bank offers a 6-month forward bid price of 1.39 and an offer price of 1.40. Answer ALL of the following questions: Explain whether in your opinion, AWC is naturally short or long the USD/AUD exchange rate and what its hedging strategy should be. Assume that AWC enters into a forward hedge with its bank, explain what its profit will be in 6 months if USD/AUD = 1.2 and USD/AUD = 1.5. AWCs management learn that their competitors have not hedged. Discuss whether in your opinion, AWC is at risk because of its decision to hedge and explain which stakeholders should be advised of your hedging strategy. In your own words, explain what other hedging strategies and derivative instruments could be considered by AWC and describe their advantages and disadvantages. Are there other non-derivative treatment options available to AWC?