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Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy equipment. The purchase
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy equipment. The purchase price was Won7,800 million. Won1,000 million has already been paid, and the remaining Won6,800 million is due in six months. The current spot rate is Won1,120S, and the 6-month forward rate is Won1,177/. The 6-month Korean won interest rate is 17% per annum, e 6 month U dollar rate is 5% per annum. o cat can invest at hese interest ates, or borrow at % per annum abo e hose rates Ao-month ca option on on with a m 200 strike ate as a % premium while the 6-month put option at the same strike rate has a 3.3% premium. Bobcat can invest at he rates given above, or borrow at 2% per annum above hose rates. Bobcats weighted average cost o capital is 10.5%. Compare alternate ways below that Bobcat might deal with its oreign exchange exposure. a. How much in U.S. dollars will Bobcat pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be Won1,120VS? Won1,177/S? b. How much in U.S. dollars will Bobcat pay in 6 months with a forward market hedge? c. How much in U.S. dollars will Bobcat pay in 6 months with a money market hedge? d. How much in U.S. dollars will Bobcat pay in 6 months with an option hedge if the expected spot rate in 6 months is assumed to be less than Won1,200$? To be Won1,300/5? a. How much in U.S. dollars will Bobcat pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be Won1,120VS? $(Round to the nearest cent) How much in U.S. dollars will Bobcat pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be Won1,177? $1 1 (Round to the nearest cent )
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