Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials that are used in a variety of pigment applications in many industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 6,100,000 dirhams, payable in six months.Six-month call options on 6,100,000 dirhams at an exercise price of 11.50 dirhams per dollar are available from Bank Al-Maghrub at a premium of 1.6%. Six-month put options on 6,100,000 dirhams at an exercise price of 11.50 dirhams per dollar are available at a premium of3.1%. Using the exchange rate and interest rate data in the popup window, compare alternate ways below that Micca might hedge its foreign exchange transaction exposure.
a. How much in U.S. dollars will Micca pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be 11.50 dirhams per dollar? 12.00 dirhams per dollar?
b. How much in U.S. dollars will Micca pay in 6 months with a forward market hedge?
c. How much in U.S. dollars will Micca pay in 6 months with a money market hedge?
d. How much in U.S. dollars will Micca pay in 6 months with an option hedge if the expected spot rate in 6 months is assumed to be less than 11.50 dirhams per dollar?
e. What is your recommendation?
Micca Metals, Inc. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials that are used in a variety of pigment applications in many industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 6.100,000 ditams, payable in six months. Six-month call options on 6,100.000 dirhams at an exercise price of 11.50 dirhams per dollar are available from Bank Al-Maghrub at a premium of 1.6% Six-month put options on 6,100.000 dirhams at an exercise price of 11.50 dirhams per dollar are available at a premium of 3.1%. Using the exchange rate and interest rate data in the popup window, compare alternate ways below that Micce might hedge its foreign exchange transaction exposure. a. How much in U.S. dollars wil Micca pay in 6 months without a bedge if the expected spot rate in 6 months is assumed to be 11.50 dirhams per dollar? 12.00 dirhams per dollar? b. How much in U.S. dollars will Micca pay in 6 months with a forward market bedge? c. How much in U.S. dollars will Moca pay in 6 months with a money market hedge? d. How much in U.S. dollars will Micca pay in 6 months with an option hedge if the expected spot rate in 6 months is assumed to be less than 11.50 dirhams per dolar? e. What is your recommendation? a. How much in U.S. dollars will Micca pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be 11.50 dirhams per dollar? (Round to the nearest cent) Help me solve this View an example Get more help. Clear all Check answer Data table Assumptions Shipment of phosphates from Morocco, Moroccan dirhams Micca's cost of capital (WACC) Spot exchange rate, dirhams/$ 6-month forward rate, dirhams/$ Print Values C 6-month interest rate for borrowing, Morocco (per annum) 6-month interest rate for investing, Morocco (per annum) 6-month interest rate for borrowing, U.S. (per annum) 6-month interest rate for investing, U.S. (per annum) Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. 7.50% Done 6,100,000 18.00% 11.50 12.00 100% 9.50% 8.50% Micca Metals, Inc. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials that are used in a variety of pigment applications in many industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 6.100,000 ditams, payable in six months. Six-month call options on 6,100.000 dirhams at an exercise price of 11.50 dirhams per dollar are available from Bank Al-Maghrub at a premium of 1.6% Six-month put options on 6,100.000 dirhams at an exercise price of 11.50 dirhams per dollar are available at a premium of 3.1%. Using the exchange rate and interest rate data in the popup window, compare alternate ways below that Micce might hedge its foreign exchange transaction exposure. a. How much in U.S. dollars wil Micca pay in 6 months without a bedge if the expected spot rate in 6 months is assumed to be 11.50 dirhams per dollar? 12.00 dirhams per dollar? b. How much in U.S. dollars will Micca pay in 6 months with a forward market bedge? c. How much in U.S. dollars will Moca pay in 6 months with a money market hedge? d. How much in U.S. dollars will Micca pay in 6 months with an option hedge if the expected spot rate in 6 months is assumed to be less than 11.50 dirhams per dolar? e. What is your recommendation? a. How much in U.S. dollars will Micca pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be 11.50 dirhams per dollar? (Round to the nearest cent) Help me solve this View an example Get more help. Clear all Check answer Data table Assumptions Shipment of phosphates from Morocco, Moroccan dirhams Micca's cost of capital (WACC) Spot exchange rate, dirhams/$ 6-month forward rate, dirhams/$ Print Values C 6-month interest rate for borrowing, Morocco (per annum) 6-month interest rate for investing, Morocco (per annum) 6-month interest rate for borrowing, U.S. (per annum) 6-month interest rate for investing, U.S. (per annum) Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. 7.50% Done 6,100,000 18.00% 11.50 12.00 100% 9.50% 8.50%
