1. A London-based firm is negotiating terms of a contract valued at €30,000. The UK firm is considering the options of a cash on delivery (COD) deal or a 90-day credit period. The COD option would include a 7.5% discount on the transaction value. If credit is extended no discount will be offered. Additionally, the following rates are now available

 

Currency rate                          €0.9125/$

Currency rate                          £1.2055/$

90-day forward rate                £1.2225/€        

Firm WACC                           12.40% p.a.

 

Required: Use the information available to determine which is the preferred option to optimize the GBP (£) receivable.  

Answer rating: 100% (QA)

To determine the preferred option to optimize the GBP receivable we need to compare the present valu... View the full answer