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McDonalds: Hedging Chinese account receivable (65 points) How should McDonalds hedge the receivable? Consider the options and recommend one. Assume that McDonalds prefers to invest free cash internally. Remember to label whether the alternative is risky or certain. State all rates/factors to four decimal places and amounts in whole numbers Assumptions Account receivable in Chinese yuan (), due in 6 months Spot rate /s) Bank of America 6-month forward rate (5) McDonalds internal estimate of the spot rate in 6 months (5) Annual yuan borrowing rate Annual dollar interest rate 6-month put option on yuan: Values Y$,000,00000 6.00 6.05 6.20 5.000% 2.000% 6.25 2.000% 10.000% 2.500% Strike rate (/S) MeDonalds weighted average cost of capital US Treasury Bill rate What are the costs and risk of each alternative? 1. Do nothing and exchange dollars for yuan at end of 6 months Value Certaint (I point each box) (2 pts each Amount of yuan receivable If spot rate in 6 months is the same as the forward ratc US dollar receipts would be Amount of yuan receivable If spot rate in 6 months is the same as the current spot rate US dollar receipts would be Amount of yuan receivable If spot rate in 6 months equals McDonalds internal estimate US dollar reccints would bo