Graham Cage, the mayor of Atlantic Beach, in the us, has received bids from three dredging companies for a beach renewal project. The work is carried out in three stages, with partial payment to be made at the completion of each stage. The current fc/usd spot rates are nzd/usd 1.6, dkk/usd 5.5, and cad/usd 1.3. The effective usd returns that correspond to the completion of each stage are the following: r0,1 = 6.00 percent, r0,2 = 6.25 percent and r0,3 = 6.50 percent. The companies' bids are shown below. Each forward rate corresponds to the expected completion date of each stage.

(a) Which offer should Mayor Cage accept?
(b) Was he wise to accept the bids in each company's own currency? Please explain.

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Stage 1 Stage 2 Stage 3 Cpany Auckland Dredging NZD 1,700,000 NzD 1,800,000 NzD 1,900,000 forward rate NzD/UsD Fo1 1.65 Fo,2 1.70 Fo3 1.75 Copenhagen Dredging DKK 5,200,000 DKK 5,800,000 DKK 6,500,000 Vavrxin cAn 1,300,0 CAn1,A0,000 CAD 1,300000 forward rate CAD/US Fo1 1.35 Fo2 1.30 Fo,3-1.25