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 comma 8007,800 million. Won1,000 million has already been paid, and the remaining Won6 comma 8006,800 million is due in six months. The current spot rate is Won1 comma 1001,100/$, and the 6-month forward rate is Won1 comma 1631,163/$. The6-month Korean won interest rate is 16.516.5% per annum, the 6-month U.S. dollar rate is 55% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates. A 6-month call option on won with a Won1 comma 2001,200/$ strike rate has a 4.34.3% premium, while the 6-month put option at the same strike rate has a 3.83.8% premium. Bobcat can invest at the rates given above, or borrow at 2% per annum above those rates. Bobcat's weighted average cost of capital is 11.511.5%. Compare alternate ways below that Bobcat might deal with its foreign 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 comma 1001,100/$?

Won1 comma 1631,163/$?

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 comma 2001,200/$?

To be

Won1 comma 3001,300/$?

e. What do you recommend?

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 Won1,100/S, and the 6-month forward rate is Won1,163S. The 6-month Korean won interest rate is 16 5% per annum, the 6-month US dollar rate is 5% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates A 6-month call option on won with a Won 1,200/S strike rate has a 4.3% premium, while the 6-month put option at the same strike rate has a 3.8% premium. Bobcat can invest at the rates given above. or borrow at 2% per annum above those rates Bobcats weg ted average cos i ca exchange exposure ight s om arate e a s na Bobcat eal y reign 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 Won1,100/S? Won1,163/S? b. How much in US 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? 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/s