Farah Jeans. Farah Jeans of San Antonio, Texas, is completing a new assembly plant near Guatemala City. A final construction payment of Q8,000,000 is due in six months. ("Q" is the symbol for Guatemalan quetzals.) Farah uses 18.50% per annum as its weighted average cost of capital. Today's foreign exchange and interest rate quotations are as follows: Farah's treasury manager, concerned about the Guatemalan economy, wonders if Farah should be hedging its foreign exchange risk. The manager's own forecast is as follows: D a. How much in U.S. dollars will Farah Jeans pay in 6 months without a hedge if the expected spot rate in 6 months is 08.0375? 07.19/$? 06.30/5? b. How much in U.S. dollars will Farah Jeans pay in 6 months with a forward market hedge? c. How much in U.S. dollars will Farah Jeans pay in 6 months with a money market hedge? d. Which method would you select and why? Construction payment due in 6 months (A/P, quetzals) 8,000,000 Present spot rate (quetzals/$) 6.83 6-month forward rate (quetzals/S) 6.97 Guatemalan 6-month interest rate (per annum) 13.00% U.S. dollar 6-month interest rate (per annum) 6.00% Farah's weighted average cost of capital (WACC) 18.50% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Expected spot rate in 6-months (quetzals/$): Highest expected rate (reflecting a significant devaluation) 8.03 Expected rate 7.19 Lowest expected rate (reflecting a strengthening of the quetzal) 6.30 Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet