Umar Enterprise sold laptops and photostat machines to the AZ Institute in Germany on credit within six months payables with invoiced 10 million. Currently, the six-month forward exchange rate is $1.10/ and the financial advisor for Umar Enterprise predicts that the spot rate is likely to be $1.05/ in six months.

a. Compute the estimated profit or loss from forward hedging.

(3 marks)

b. Would you advise Umar Enterprise to hedge? Discuss. (4 marks)

c. If the future spot rate is the same as today's forward exchange rate. Would you advise on hedging? Discuss.