Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials which are used in a variety of pigment applications in many other industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 4,000,000, dirhams, payable in six months. Six-month call options on 4,000,000 dirhams at an exercise price of 10.00 dirhams per dollar are available from Bank Al-Maghrub at a premium of 2%. Six-month put options on 4,000,000 dirhams at an exercise price of 10.00 dirhams per dollar are available at a premium of 3%. Compare and contrast alternative ways that Micca might hedge its foreign exchange transaction exposure. What is your recommendation? Please use WACC for calculating the carry forward $ cash flows. Assumptions Shipment of phosphates from Morocco, Moroccan dirhams Micca's cost of capital (WACC), per annum Spot exchange rate, dirhams/$ Six-month forward rate, dirhams/$ Values 4,000,000 12.000% 10.00 9.70 Options on Moroccan dirhams: Strike price, dirhams/$ Option premium (percent) Six-month interest rate for borrowing (per annum) Six-month interest rate for investing (per annum) Call Option Put Option 10.00 2.000% 10.00 3.000% United States Morocco 6.000% 8.000% 5.000% 7.000% Please discuss the following options and make a recommendation for Micca metals. 1. Remain uncovered. 2. Forward market hedge. 3. Money market hedge. 4. Option hedge.