Suppose that you work for Westinghouse Electric Company. You are bidding to design a new nuclear power station in Bulgaria. If you win the bid you will receive EUR 100,000,000. You have collected the following market data (I am using the most recent data on Feb.207,2021).

Spot: USD 1.2073/EUR

Forward: USD 1.2180/EUR

12-month USD Libor: +0.28375%

12-month EUR Libor: -0.48014%

WACC: 6%

Call option: strike price USD 1.2300/EUR, premium USD 0.0245/EUR

Put option: strike price USD 1.2300/EUR, premium USD 0.0306/EUR

Note: how to compute the call premium: 0.0245*100,000,000

1) Compute the revenue if you hedge with a forward.

2) Suppose that you hedged with the option. What will be your revenue if the spot rate is USD 1.2100/ EUR?

3) Suppose that you decide to hedge in the money market. Compute the hedged revenue. Please round to the nearest USD.

4) You have a novel idea. Hedge EUR 50,000,000 in the forward market and leave the rest unhedged. What will be your revenue if the spot rate in 12 months is USD 1.23/EUR?