The Australian Dollar (A$) 2-month borrowing rate is 3.50% per annum and the Australian Dollar (A$) 2-month investment rate is 2.50% per annum.

The Euro () 2-month borrowing rate is 4.40% per annum and the Euro () 2-month investment rate is 2.26% per annum.

The current spot exchange rate between Euro () and Australian Dollar (A$) is A$1.55/.

The 2-month forward rate is A$1.61/.

An Australian organisation is expecting to hedge both its account payables and account receivables.

The organisation's capital structure comprises 47% debt and 53% equity.

The risk-free rate is 2.2%, and the organisation's credit risk premium is 4.5%. Further, it is given that the expected rate of return on a well-diversified market portfolio held by an investor is 14%. The corporate income tax rate is 25%.

The beta of shares of the organisation is 0.95.

(a) Determine the organisation's weighted average cost of capital.

(b) Between forward market hedge and money market hedge, which hedge option is suitable for a cash flow of 1 million due to a supplier in 2 months?

(c) Between forward market hedge and money market hedge, which hedge option is suitable for a cash flow of 1 million due from a customer in 2 months?

File 5 Excel Edit View Insert Format Tools AutoSave OFF Data Window Help Question Generator--T1-20 Review View Tell me Insert me Insert Draw Page Layout Formulas Data X Arial 14 General IM 100 aste B I U A V K% 00 3 3x v fx 8 Q3 The Australian Dollar (A$) 2-month borrowing rate is 3.50% per annum and the Australian Dollar (A$) 2-month investment rate is 2.50% per annum. The Euro () 2-month borrowing rate is 4.40% per annum and the Euro () 2-month investment rate is 2.26% per annum. The current spot exchange rate between Euro () and Australian Dollar (A$) is A$1.55/. - The 2-month forward rate is A$1.61/. An Australian organisation is expecting to hedge both its account payables and account 6 receivables The organisation's capital structure comprises 47% debt and 53% equity. The risk-free rate is 2.2%, and the organisation's credit risk premium is 4.5%. Further, it is given that the expected rate of return on a well-diversified market portfolio held by an investor is 14%. The corporate income tax rate is 25%. 9 The beta of shares of the organisation is 0.95. 11 (a) Determine the organisation's weighted average cost of capital. (b) Between forward market hedge and money market hedge, which hedge option is suitable for a cash flow of 1 million due to a supplier in months? (c) Between forward market hedge and money market hedge, which hedge option is suitable for a 13 cash flow of 1 million due from a customer in 2 months? 14 15 16 17 18 10 Student Information @ 01 02 04 Select destination and press ENTER or choose Paste 10 12 Q3 + 3 tv A