Use the information for the following problem(s). Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for euro 1,250.000. The sale was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars. Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. - The spot exchange rate is $1.40/ euro - The six manth forward rate is $1.38/ euro - Plains States' cost of capital is 11% - The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 monthst - The Euro zone 6-month lending rate is 7% for 3.5% for 6 months - December put options for euro 625.000 strike price $1.42, premium price is 1.5% - Plains States' forecast for 6 -month spot rates is $1.43 /euro - The budget rate, or the lowest acceptable sales price for this project is $1,075,000 or $1.35 /euro Refer to Instruction 10.1. Plains States would be by an amount equal to with a forward hedge than if they had not hedged and their predicted exchange rate for 6 mon ths had been correct. better off; $43,750 better off; $62.500 worse off: $43,750 worse off: 562,500