Mauna Loa Macadamie a macadamia nut subsidiary of Hershey's with plantations on the slopes of it 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 Y1,320,000,000. At the present exchange rate of Y124/$, this is equivalent to $10,645,161. Sales are relatively equally distributed throughout the year. They show up as a Y27,500,000 account receiveable on Mauna Loa's balance sheet Credit terms to each customer allows for 60 days before payment is due. Monthly cash collections are typically Y110,000,000. Mauna Loa would like to hedge its yen receipts but is 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 3.50%

How much should Mauna Loa borrow in US Dollars? _________________________

What should be the terms of payment on the yen loan?

loan paid monthly out of cash flows with payments on interest and prinicpal

or borrow from accounts receivable to cover accounting exposure or

borrow from account receivable and cash flows