QUESTION 1 KIKWETU MNC, a Kenyan based Multinational expect spot rate of the US Dollar to be KSH100, KSH103 or KSH104 when the payables are due This analysis is based on the companys raw research carried out by its quality assurance department, which predicted a decrease in the value of the Kenya shillings (KSH) relative to the USA dollar The company has payables of $4,000,000, 120 days from today There exists a call option with an exercise price of KSH102 The option premium is KSH2 per unit REQUIRED Show the effect of each of these scenarios on KIKWETUs cost of payables Explain to the management of the company, when the option is exercisable and when it should be allowed to lapse Assume in scenario (a) above, KIKWETU MNC had receivables and a put option available accordingly Other information remains the same REQUIRED Show the effect of each of these scenarios on KIKWETUs receivables Explain to the management of the company, when the option is exercisable and when it should be left to lapse

The Answer is in the image, click to view ...

Question: QUESTION 1 KIKWETU MNC, a Kenyan based Multinational expect spot rate of the US Dollar to be KSH100, KSH103 or KSH104 when the payables are

QUESTION 1

KIKWETU MNC, a Kenyan based Multinational expect spot rate of the US Dollar to be KSH100, KSH103 or KSH104 when the payables are due. This analysis is based on the companys raw research carried out by its quality assurance department, which predicted a decrease in the value of the Kenya shillings (KSH) relative to the USA dollar.

The company has payables of $4,000,000, 120 days from today. There exists a call option with an exercise price of KSH102. The option premium is KSH2 per unit.

REQUIRED

Show the effect of each of these scenarios on KIKWETUs cost of payables
Explain to the management of the company, when the option is exercisable and when it should be allowed to lapse
1. Assume in scenario (a) above, KIKWETU MNC had receivables and a put option available accordingly. Other information remains the same.

REQUIRED

Show the effect of each of these scenarios on KIKWETUs receivables
Explain to the management of the company, when the option is exercisable and when it should be left to lapse

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Chapter 9 1. Measuring Forecast Accuracy You are hired as a consultant to assess a firms ability to forecast. The firm has developed a point forecast for two different currencies presented in the...

Assignment 1: MNC Enters China Due Week 8 and worth 300 points Select one (1) MNC that does not currently do business in China. Next, consider the steps that the company should consider in...

Hi there I need help answering ASSIGNMENT 1 ONLY by Friday afternoon. I have attached the study pack to help answer the question. Thanks! FIN4802 ASSIGNMENTS ASSIGNMENT 01 Due date: 13 May 2016...

What factors should be considered in deciding whether the cost of capital for a foreign affiliateshould be higher, lower, or the same as the cost of capital for a comparable domestic operation?...

1. 22. What factors affect the degree of firm's translation exposure? 1. 23. Consider a period in which the U.S dollar weakens against the euro. How will this affect sspthe reported earnings of (1...

QUESTION 1 Subject: Financial Markets What is the correct answer for these questions? True or False 1). When international trade in financial assets is easy and reliable, due to low transactions...

I need help answering two essay questions which are due 10/18 Weds. You must choose 2 out of 4 essay topics to write on and have a 2 hr time limit once we start. I will provide slides and supporting...

GOOD DAY MY BEST WRITER ATTACHED HERE IS MY INT 620 FINAL PROJECT ,I AM ALSO ATTACHING WHAT I HAVE WRITTEN ON HISTORIC BACKGROUND, MILESTONE ONE ,AND MILESTONE TWO FOR YOU TO COMBINED UPGRADE AND DO...

Question 1(0.2 points) Country risk should be incorporated into the international capital budgeting analysis by Question 1 options: including the country risk premium to sunk costs. adjusting the...

In the PDA research described in Problem 15, one of the outcome variables was mean airway pressure (measured in cm H2O) seven days after birtha measure of respiratory status. The data on this outcome...

Jason and Mary are married taxpayers in 2014. They are both under age 65 and in good health. For this tax year, they have a total of $41,000 in wages and $500 in interest income. Jason and Marys...

Answer this 12. A point charge @1, located at the origin in free space, produces a field E = 10a, V/m for r = 1 m. (a) Find Q,. (b) Using this value of Q,. find E at P(2, - 1.5) in cartesian compo-...

Which is the main federal income tax form? Group of answer choices W-4 Form 1099 W-2 Form 1040

Understand the impact of institutional factors and labor laws, in particular, on HRM.

In your opinion, why and to what extent could having a B Corp certification help an SME in attracting and retaining skilled and talented workers?

In your opinion, which are the main obstacles that a family-owned SME may encounter in getting a B Corp certification? And what are the facilitating factors? Please answer these questions both in...