Terex (US) just purchased a British company that produces plastic nuts and bolts for heavy equipment. The purchase price was 100 million British pounds (GBP). 15 million GBP has already been paid, and the remaining 85 million GBP is due in three months. The current spot rate is $1.3806/GBP, and the 3-month forward rate is $1.412/GBP Terex can invest and borrow at the rates given below. Terex's weighted average cost of capital is 11%. Assume Terex invests free cash intemally. Compare altemate ways that Terex might deal with its foreign exchange exposure. What do you recommend and why? 2. Forward market hedge. Buy GBP forward three months Account payable (GBP) Forward rate Cost of settlement in three months (US\$) \begin{tabular}{|l|} \hline \\ \hline \\ \hline \end{tabular} 3. Money market hedge. Exchange dollars for pounds now, invest for three months. Account payable (GBP) Discount factor at the pound interest rate for 3 months Pounds needed now Current spot rate (USD/GBP) US dollars needed now Carry forward rate for three months (WACC) US dollar cost, in three months, at settlement 4. Option hedge: GBP