Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. Micca just purchased a shipment of phosphates from Moroocco for 6,000,000 dirhams, payable in six months.

Six month call options on 6,000,000 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 option on 6,000,000 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 is foreign transaction exposure. What is your reccomendation?

Below is the table associated with the question.

Shipment of phosphates from Morocco, Morocco, dirhams 6,000,000

Micca's cost of capital (WACC) 14%

Spot exchange rate, dirhams/$ 10.00

6-month forward rate, dirham/$ 10.40