Question: Alert Ltd. is planning to import a multi-purpose machine from Japan at a cost of 3,400 lakhs yen. The company can avail Rupee loans at

Alert Ltd. is planning to import a multi-purpose machine from Japan at a cost of 3,400 lakhs yen. The

company can avail Rupee loans at 18% interest per annum with quarterly rests with which it can

import the machine.

Alternatively, there is an offer from Tokyo branch of an India based bank extending credit of 180 days at 2% per annum interest against opening of an irrevocable letter of credit.

Other Information:

Present exchange rate Rs. 100 = 340 yen.

180 days' forward rate Rs. 100 = 345 yen.

Advise whether the co. should avail loan or accept the offer from Tokyo branch of India based bank.

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