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Pupule Travel, a Honolulu, Hawaii-based 100% privately owned travel company, has signed an agreement to acquire a 50% ownership share of Taichung Travel, a Taiwan-based

Pupule Travel, a Honolulu, Hawaii-based 100% privately owned travel company, has signed an agreement to acquire a 50% ownership share of Taichung Travel, a Taiwan-based privately owned travel agency specializing in servicing inbound customers from the United States and Canada. The acquisition price is 5825161 Taiwan dollars payable in cash in three months.

Thomas Carson, Pupule Travel's owner, believes the Taiwan dollar will either remain stable or decline slightly over the next three months. At the present spot rate isNT$ 33.40/$. Taiwanese interest-bearing deposits by non-residents are regulated by the government, and are currently set at 1.5000% per year. He does not believe that he can calculate a credible weighted average cost of capital since he has no stock outstanding and his competitors are all also privately held. Since the acquisition would use up all his available credit, he wonders if he should hedge this transaction exposure. He has the following quotes from the Bank of Hawaii:

Spot rate (NT$/$)

33.40

3-month forward rate (NT$/$)

32.40

Annual Taiwan dollar deposit rate

1.5000%

Annual dollar net borrowing rate

6.5000%

3-month call option on NT$

not available

How much in U.S. dollars will Pupule Travel pay in 3 months if Pupule Travel enters into forward hedge? Round to the nearest whole number.

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