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42. Managing Risks using Forward Contract - Cancelling Forward Contract On 1st April, Raga Musicals and Entertainment concluded a contract for purchase of 1,000,000 Blue Ray Discs from an American Company at $ 1.48 per Disc, to be supplied over the next 3 Months. Raga Musicals are required to make the payment immediately upon receipt of all the discs. To meet the obligation, Raga Musicals had booked a Forward Contract with its Bankers to buy USD 3 Months hence. The following are the Exchange Rates on 1st April - Spot * 41.30 - 70 3 Months Forward 42.00 - 50 On 1st July, the American Company expressed its inability to supply the last instalment of 300,000 Blue Ray Disks due to export restrictions in US, and requested Raga to settle for the quantity supplied. Spot Rate on 1st July was 40.90 - 41.20. (a) Ascertain the Total Cash Outgo for Raga for purchase of 700,000 Discs. (b) Would Total Cash Outgo undergo any change if the American Company had informed on 1st June, when the following Exchange Rates were available - (a) Spot = 41.70 - 42.20, (b) 1-Months Forward = 42.10 - 42.50 of innanrd Contract for 300.000 Units