Tab Window Help X chapter 10 advanced problem X C Chronos Time Pieces. Chronox G how to remove space or EDFr9OXG35vimXtCmrUeQeRILBb7FM4/edit 11 2 LUTELY GEILD CALCOLE TEE 3 14 15 6 P & G India's cost of capital 8.00% Problem 10.2 Bobcat Company Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korcan company that produces plastic nuts and bolts for heavy equipment. The purchase price was Won 7.500 million Won 1.000 million has already been paid, and the remaining Won 6,500 million is due in six months. The current spot rate is Won 1,110/$, and the 6-month forward rate is Won 1,175/S. The six-month Korean won interest rate is 12% per annum, the six-month US dollar rate is 4% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates. A six-month call option on won with a 1200/S strike rate has a 3.0% premium, while the six-month put option at the same strike rate has a 2.4% premium. Bobcat can invest at the rates given above, or borrow at 2% per annum above those rates. Bobcat's weighted average cost of capital is 10%. Compare alternate ways that Bobcat might deal with its foreign exchange exposure. What do you recommend and why? LLLLLLS Tab Window Help X chapter 10 advanced problem X C Chronos Time Pieces. Chronox G how to remove space or EDFr9OXG35vimXtCmrUeQeRILBb7FM4/edit 11 2 LUTELY GEILD CALCOLE TEE 3 14 15 6 P & G India's cost of capital 8.00% Problem 10.2 Bobcat Company Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korcan company that produces plastic nuts and bolts for heavy equipment. The purchase price was Won 7.500 million Won 1.000 million has already been paid, and the remaining Won 6,500 million is due in six months. The current spot rate is Won 1,110/$, and the 6-month forward rate is Won 1,175/S. The six-month Korean won interest rate is 12% per annum, the six-month US dollar rate is 4% per annum. Bobcat can invest at these interest rates, or borrow at 2% per annum above those rates. A six-month call option on won with a 1200/S strike rate has a 3.0% premium, while the six-month put option at the same strike rate has a 2.4% premium. Bobcat can invest at the rates given above, or borrow at 2% per annum above those rates. Bobcat's weighted average cost of capital is 10%. Compare alternate ways that Bobcat might deal with its foreign exchange exposure. What do you recommend and why? LLLLLLS