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 Won7,500 million. Won1,000 million has already been paid, and the remaining Won6,500 million is due in six months. The current spot rate is Won950/$, and the 6-month forward rate is Won975/$. The six-month Korean won interest rate is 8% per annum, the six-month US dollar rate is 6% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates. A six-month call option on won with a 1,000/$ strike rate has a 2.0% premium, while the six-month put option at the same strike rate has a 1.4% 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 12%. Compare alternate ways that Bobcat might deal with its foreign exchange exposure. What do you recommend and why? Assumptions Values Purchase price of Korean manufacturer, in Korean won 7,500,000,000 Less initial payment, in Korean won (1,000,000,000) Net settlement needed, in Korean won, in six months 6,500,000,000 Current spot rate (Won/$) 950 Six month forward rate (Won/$) 975 Bobcat's cost of capital (WACC) 12.00% Options on Korean won: Call Option Put Option Strike price, won 1,000.00 1,000.00 Option premium (percent) 2.000% 1.400% United States Korea Six-month investment (not borrowing) interest rate (per annum) 6.000% 8.000% Borrowing premium of 2.000% 2.000% 2.000% Six-month borrowing rate (per annum) 8.000% 10.000% Refer to Instruction 10.1. If Bobcat decides to perform a money market (balance sheet) hedge, how many US dollars will in need at settlement in 6-months? Group of answer choices

$6,587,947.

Won6,578,947.

Won6,973,684.

$6,973,684.