P&G India. Procter and Gamble's affiliate in India, P&G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. P&G India wishes to hedge an 8.8 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like P&G India to work with a currency agent who will, in this case, lock in the current spot exchange rate in exchange for a 5.47% fee. Using the exchange rate and interest rate data in the popup window, compare alternate ways below that P&G India might deal with its foreign exchange exposure. Assume a 360-day financial year.

Spot rate: 2.48438

180-day forward rate: 2.4225

Expected spot, 180 days: 2.5645

180-day Indian rupee investing rate: 7.57%

180-day Japanese yen investing rate: 2.21%

Currency agent's exchange rate fee: 5.47%

P&G India's cost of capital: 12.33%

a. How much in Indian rupees will P&G India pay in 180 days without a hedge if the expected spot rate in 180 days is assumed to be 2.48438/Rs? (Round to the nearest whole number.)

How much in Indian rupees will P&G India pay in 180 days without a hedge if the expected spot rate in 180 days is assumed to be 2.4225/Rs? (Round to the nearest whole number.)

How much in Indian rupees will P&G India pay in 180 days without a hedge if the expected spot rate in 180 days is assumed to be 2.5645/Rs? (Round to the nearest whole number.)

b. How much in Indian rupees will P&G India pay in 180 days with a forward market hedge?

c. How much in Indian rupees will P&G India pay in 180 days with a money market hedge?

d. How much in Indian rupees will P&G India pay in 180 days with a currency agent hedge?