FERGS Plc has export orders from a company in Singapore for 250,000 washers and from a company in Indonesia for 100,000 washers. The unit cost to FERGS of producing washers is 0.55. The unit sales price to Singapore is 2.862 Singapore dollars (SG $) and to Indonesia, 2,246 Rupiahs (RP). Both orders are subject to credit terms of 60 days and are payable in the currency of the importers. It is considered possible that payments from either could be delayed for as long as 90 days. The Indonesian customer has offered to FERGS the alterative of being paid US$ 125,000 in three months time instead of payment in Rupiahs. The Rupiah is forecast to depreciate in value during the next year by 30% (from an Indonesian perspective) against the USD. FOREIGN EXCHANGE RATES (MID RATES) Spot 1 month forward... 2 months forward. 3 months forward. 1 US $ = SG $ 2.1378 2.1132 Irish clearing bank... Singapore bank... Indonesian bank. US domestic bank... 2.0064 2.0915 Deposit 6.5% .4% 15% 1-SG S 3.1780 3.1620 ..8% 3.1545 3.1584 Assume that, in the domestic economy, any foreign currency holding must be immediately converted into euro. MONEY MARKET RATES (% PER YEAR) Borrow 10.5% 7% Not available 12% 1 = US $ 1.4866 1.4963 1.5047 1.5101 1 = RP 2,481 No market These interest rates are fixed for immediate deposits or borrowing over a period of two or three months. Given the information provided, calculate on a simple interest basis the Euro receipts that FERGS can expect from its sales to Singapore and Indonesia, if the foreign exchange risk is hedged using: a. The money markets. b. Forward exchange contracts (50 marks) (50 marks) (100 marks)