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PLEASE SHOW WORKINGS .2 Bobcat Company. Bobcat Company, a U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts
PLEASE SHOW WORKINGS
.2 Bobcat Company. Bobcat Company, a U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy equipment. The purchase price was 7,500 million. 1,000 million has already been paid, and the remaining 6,500 million is due in six months. The current spot rate is 1,110/$, and the 6 -month forward rate is 1,175/$. The 6 -month Korean won interest rate is 16% per annum, the 6 month U.S. dollar rate is 4% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates. A 6 -month call option on won with a 1,200/$ strike rate has a 3.0% premium, while the 6 -month put option at the same strike rate has a 2.4% premium. Bobcat can invest at the rates given previously, or borrow at 2% per annum above those rates. Bobcat's weighted average cost of capital is 10%. Compare alternate ways that Bobca might deal with its foreign exchange exposure. What do you recommend and whyStep by Step Solution
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