Outline four factors that influences the cost of Capital of a multinational corporation (4 Marks)

c) Unga Ltd international Ltd is an import-export company based in Kenya. On I September 2022, the company exported coffee to South Africa on a three months credit amounting to South African Rands (SAR) 15, 000,000

Additional Information:

1) The rates in the forex and money markets were as follows: Ksh/1SAR

1 September 2022 1 December 2022

Kenya

7.80 7.95

Interest rates

16 % per annum 14 % per annum

South Africa

2) The customer settled the amount on 1 December 2022

Required:

i) Using the Interest rate parity, determine the expected three -months forward

exchange rate as at 1 December 2022

(3 Marks)

1

Ii) Using suitable computations, advice Upendo Ltd on which is the better hedging strategy between a forward contract and money market hedge