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Terex hedging an account payable. (35 points) Terex (US) just purchased a Isracli company that produces plastic nuts and bolts for heavy equipment. The purchase price was Isracli New Shekel (ILS) 150 million. ILS 75 million has already been paid, and the remaining ILS 75 million is due in six months. The current spot rate is 4.00 ILS/S, and the 6-month forward rate is 4.10 ILS/S Terex can invest and borrow at the rates given below. Terex's weighted average cost of capital is 12%. Assume Terex invests free cash internally. Compare alternate ways that Terex might dcal with its forcign exchange exposurc. What do you recommend and why? State all rates/factors to four decimal places and amounts in whole numbers Assum Purchase price of Isracli manufacturer, in Israeli New Shekels (ILS) Less initial Net settlement nceded, in ILS, in six months Current spot rate (ILS/S) Six month forward rate (ILS/S) Terex's cost of capital (WACC) Options on Isracli New Shekel (ILS): Values payment, in ILS 75,000,000 4,00 4.10 12.00% Call Strike price, ILS 2.00% United States 3.00% 2.00% Option premium (percent) Isracl 7.00% Annual investment (not borrowing) interest rate Annual borrowing rate Risk M anagement Alternatives 1. Remain uncovered, making the shekel (ILS) payment in 6 months at the spot rate in effect at that date cach box (2 pts each box) Account payable (ILS) If spot rate in six months current spot rate (ILS/S) Cost of settlement in six months (USS) Account payable (ILS) If spot rate in six months forward rate (ILS/S)