ToyX is a U.S.-based company whose sales are about two-thirds in dollars (Asia and the Americas) and one-third in euros (Europe). In September ToyX delivers a large shipment of toys to a major distributor in Antwerp. The receivable, 30 million, is due in 90 days, standard terms for the toy industry in Europe. ToyXs treasury team has collected the following currency and market quotes. See below.

The company's foreign exchange advisors believe the euro will be at about $1.4200/ in 90 days. ToyX's management does not use currency options in currency risk management activities.

a. What would be the revenues in US dollars in 90 days if the company uses forward market hedges?

b. What would be the revenues if the company uses money market hedges.

c. Compare the receipts for the two choices.

Current spot rate ($) $1.4158

Credit Suisse 90-day forward rate ($) $1.4172

Barclays 90-day forward rate ($) $1.4195

ToyXs WACC ($) 9.6%

90-day Dollar interest rate 4.000% p.a.

90-day Euro interest rate 3.885% p.a.

90-day Dollar borrowing rate 5.000% p.a.

90-day Euro borrowing rate 5.000% p.a.