Need help with these questions! Thanks so much in advance!!

1. (16 points) A company based in the U.S. has sales which are roughly two-thirds in dollars and one-third in euros. In September the company delivers a large shipment of toys to a major distributor in Antwerp (Europe). The sale created a receivable of 80 million, due in 60 days, standard terms for the toy industry in Europe. The company's foreign exchange advisors believe with conviction that the value of the euro in 60 days will be either higher or lower or the same as the current value. The following table shows quotes which the company's treasury team received from the banks with which the company has an ongoing relationship. Collected through communication with the banks regarding the specific situation, these quotes apply to the current matter at hand (including money-market quotes for deposits/borrowing against the receivable). Assume the management does not use options on foreign exchange for their risk management activities, and that the company's estimated cost of capital is 13.2% per year (and one sixth of that per sixty days). In lieu of options, describe the alternative ways that the company could go about addressing the exchange rate risk associated with the euro receivable (carefully describe every transaction that would be taken to implement each alternative way). Based on your calculations, which of the alternatives would you advise the company to choose? Current sport rate ($/) 60-day forward rate ($/) 60-day euro interest rate (per year) 60-day dollar interest rate (per year) 60-day euro borrowing rate (per year) 60-day dollar borrowing rate (per year) 1.1125 1.1275 1.8% 2.4% 3.6% 4.2% 2. (16 points) A manufacturing firm in San Antonio, Texas, is completing a new assembly plant near Guatemala City. A final construction payment of Q63,000,000 is due in six months. (Q is the symbol for Guatemalan quetzals). The company uses 12% per year as its weighted average cost of capital. Quotes for foreign exchange and for interest rates (in annual terms) available to the company are as follows: Construction payment due in six months Bid and ask quotes for the spot rate (quetzals per one dollar) Bid and ask quotes for the 6-month forward rate (quetzals per one dollar) 6-month Guatemalan interest rate (per year) 6-month dollar interest rate (per year) The company's estimated (per year) cost of capital (WACC) 63,000,000 8.380 and 8.400 8.650 and 8.750 10.0% 2.5% 12.0% The company's treasury manager, concerned about the Guatemalan economy, contemplates if and how the company should be hedging its foreign exchange risk. What realistic alternatives are available to the company for making payments? Which method would you select and why? Explain each alternative (including a forward hedge and a money market hedge) and precisely describe the transactions it entails. 3. (16 points) A European company based in Italy bought supplies from an American seller. The purchase created a payable" of $3,000,000 due in 6 months. The following quotes are available to the company: Current spot rate ($/) 6-month forward rate ($/) Dollar interest rate offered Euro interest rate offered Dollar denominated borrowing rate Euro denominated borrowing rate 1.10 dollar per euro 1.08 dollar per euro 3.5% per year 2.8% per year 5.0% per year 4.2% per year Suggest two alternative ways for the European company to fully hedge the exchange rate risk associated with the payable, and calculate which seems more preferable if the company uses a Weighted Average Cost of Capital (WACC) rate of 16.0% (per year) to discount future cash flows. For each of the two alternatives, describe all the details of the transactions the company would make. 8. (16 points) At a time when the dollars per pound exchange rate was $1.40/, two companies entered a currency swap agreement with the following terms. (Some of the figures below, as well as the company names, have been changed in order to preserve the privacy of the companies (which we will call Company A and Company B) and their information). . The duration of the agreement is 10 years. Notional principal is 50 million (or the $ equivalent which at the time was $70 million). Company A will borrow 50 million from Company B at an interest rate of 4% per year. Company B will borrow $ 70 million from Company A at an interest rate of 5% per year. The first transfers will be at the end of the day the agreement was made. Interest payments are made annually and the full principal amount is due at the end of the 10-year period. (a) Upon entering the agreement (i.e. looking forward from that point in time), what are Company A's scheduled cash flows through the duration of the deal? (b) In hindsight, it turned out that the $/ exchange rate increased during the duration of the deal. Suppose that the pound appreciated against the dollar in a steady pace of 2% per year (in each year for the next decade). Calculate the net dollar value of Company A's payouts at the end of each year. (c) Suppose instead that the pound appreciated against the dollar only in the first five years of the deal (by 2% in each year), and that the latter half of the decade was characterized by steady strengthening of the dollar, appreciating by 2% against the pound in each of the remaining five years. Calculate the net dollar value of Company A's payouts at the end of each year. (d) Under the assumptions of part (c), suppose Company B filed for bankruptcy approximately 8.5 years from the inception of the swap agreement. With no assets or cash, Company B was not able to pay any creditors and defaulted on all its liabilities including the remaining two payments of the swap. What is the financial damage to Company A as a result of the bankruptcy of Company B? In your view, what are the probable implications for Company A and its operations. 1. (16 points) A company based in the U.S. has sales which are roughly two-thirds in dollars and one-third in euros. In September the company delivers a large shipment of toys to a major distributor in Antwerp (Europe). The sale created a receivable of 80 million, due in 60 days, standard terms for the toy industry in Europe. The company's foreign exchange advisors believe with conviction that the value of the euro in 60 days will be either higher or lower or the same as the current value. The following table shows quotes which the company's treasury team received from the banks with which the company has an ongoing relationship. Collected through communication with the banks regarding the specific situation, these quotes apply to the current matter at hand (including money-market quotes for deposits/borrowing against the receivable). Assume the management does not use options on foreign exchange for their risk management activities, and that the company's estimated cost of capital is 13.2% per year (and one sixth of that per sixty days). In lieu of options, describe the alternative ways that the company could go about addressing the exchange rate risk associated with the euro receivable (carefully describe every transaction that would be taken to implement each alternative way). Based on your calculations, which of the alternatives would you advise the company to choose? Current sport rate ($/) 60-day forward rate ($/) 60-day euro interest rate (per year) 60-day dollar interest rate (per year) 60-day euro borrowing rate (per year) 60-day dollar borrowing rate (per year) 1.1125 1.1275 1.8% 2.4% 3.6% 4.2% 2. (16 points) A manufacturing firm in San Antonio, Texas, is completing a new assembly plant near Guatemala City. A final construction payment of Q63,000,000 is due in six months. (Q is the symbol for Guatemalan quetzals). The company uses 12% per year as its weighted average cost of capital. Quotes for foreign exchange and for interest rates (in annual terms) available to the company are as follows: Construction payment due in six months Bid and ask quotes for the spot rate (quetzals per one dollar) Bid and ask quotes for the 6-month forward rate (quetzals per one dollar) 6-month Guatemalan interest rate (per year) 6-month dollar interest rate (per year) The company's estimated (per year) cost of capital (WACC) 63,000,000 8.380 and 8.400 8.650 and 8.750 10.0% 2.5% 12.0% The company's treasury manager, concerned about the Guatemalan economy, contemplates if and how the company should be hedging its foreign exchange risk. What realistic alternatives are available to the company for making payments? Which method would you select and why? Explain each alternative (including a forward hedge and a money market hedge) and precisely describe the transactions it entails. 3. (16 points) A European company based in Italy bought supplies from an American seller. The purchase created a payable" of $3,000,000 due in 6 months. The following quotes are available to the company: Current spot rate ($/) 6-month forward rate ($/) Dollar interest rate offered Euro interest rate offered Dollar denominated borrowing rate Euro denominated borrowing rate 1.10 dollar per euro 1.08 dollar per euro 3.5% per year 2.8% per year 5.0% per year 4.2% per year Suggest two alternative ways for the European company to fully hedge the exchange rate risk associated with the payable, and calculate which seems more preferable if the company uses a Weighted Average Cost of Capital (WACC) rate of 16.0% (per year) to discount future cash flows. For each of the two alternatives, describe all the details of the transactions the company would make. 8. (16 points) At a time when the dollars per pound exchange rate was $1.40/, two companies entered a currency swap agreement with the following terms. (Some of the figures below, as well as the company names, have been changed in order to preserve the privacy of the companies (which we will call Company A and Company B) and their information). . The duration of the agreement is 10 years. Notional principal is 50 million (or the $ equivalent which at the time was $70 million). Company A will borrow 50 million from Company B at an interest rate of 4% per year. Company B will borrow $ 70 million from Company A at an interest rate of 5% per year. The first transfers will be at the end of the day the agreement was made. Interest payments are made annually and the full principal amount is due at the end of the 10-year period. (a) Upon entering the agreement (i.e. looking forward from that point in time), what are Company A's scheduled cash flows through the duration of the deal? (b) In hindsight, it turned out that the $/ exchange rate increased during the duration of the deal. Suppose that the pound appreciated against the dollar in a steady pace of 2% per year (in each year for the next decade). Calculate the net dollar value of Company A's payouts at the end of each year. (c) Suppose instead that the pound appreciated against the dollar only in the first five years of the deal (by 2% in each year), and that the latter half of the decade was characterized by steady strengthening of the dollar, appreciating by 2% against the pound in each of the remaining five years. Calculate the net dollar value of Company A's payouts at the end of each year. (d) Under the assumptions of part (c), suppose Company B filed for bankruptcy approximately 8.5 years from the inception of the swap agreement. With no assets or cash, Company B was not able to pay any creditors and defaulted on all its liabilities including the remaining two payments of the swap. What is the financial damage to Company A as a result of the bankruptcy of Company B? In your view, what are the probable implications for Company A and its operations