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You work for a Space Mountain Rollercoasters, which is a firm whose home currency is the Mexican peso (MXN) and that is considering a foreign
You work for a Space Mountain Rollercoasters, which is a firm whose home currency is the Mexican peso (MXN) and that is considering a foreign investment. The investment yields expected after-tax Turkish lira (TRY) cash flows (in millions) as follows: this investment's time horizon. You also have the following information: The spot exchange rate is S0MXN/TRY=MXN2.8225/TRY. Assume that your firm is unable to find a way to capture the project's Turkish lira value today through mechanisms such as securitizing the project and selling the project to local investors. What is the gain in Mexican peso value that the parent company (Space Mountain Rollercoasters) can expect to receive by hedging the project's cash flows using rates as opposed to leaving the investment unhedged? a. The gain from hedging with forwards is MXN 67.56 million b. The gain from hedging with forwards is MXN 69.21 million c. The gain from hedging with forwards is MXN 66.37 million d. The gain from hedging with forwards is MXN 65.42 million e. The gain from hedging with forwards is MXN 67.92 million
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