Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mauna Loa Macadamia. Mauna Loa Macadamia, a macadamia nut subsidiary of Hershey's with plantations on the slopes of its namesake volcano in Hilo, Hawaii, exports
Mauna Loa Macadamia. Mauna Loa Macadamia, a macadamia nut subsidiary of Hershey's with plantations on the slopes of its namesake volcano in Hilo, Hawaii, exports macadamia nuts worldwide. The Japanese market is its biggest export market, with average annual sales invoiced in yen to Japanese customers of 1,440,000,000. At the present exchange rate of 128/$, this is equivalent to $11,250,000. Sales are relatively equally distributed throughout the year. They show up as a 30,000,000 account receivable on Mauna Loa's balance sheet. Credit terms to each customer allow for 60 days before payment is due. Monthly cash collections are typically 120,000,000. Mauna Loa would like to hedge its yen receipts, but it has too many customers and transactions to make it practical to sell each receivable forward. It does not want to use options because they are considered to be too expensive for this particular purpose. Therefore, they have decided to use a "matching" hedge by borrowing yen. Assume the annual interest rate on the loan is 6.00%. a. How much should Mauna Loa borrow in U.S. dollars? b. What should be the terms of payment on the yen loan? a. How much should Mauna Loa borrow in U.S. dollars? $ (Round to the nearest dollar.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started