Section B (40 marks 1. Assume you work as the Finance manager for Nix limited. Nix Ltd is a US-based company manufacturing and selling Air conditioners in the US market. Nix Ltd exports its products to the United Kingdom. Nix Ltd is due to receive 9,000,000 in 3 months from a customer for the United Kingdom. You have been asked to mitigate the forex risk related to above stated transaction and you have collected the information related to money market. Spot Rate: /S 0.5432 3-month forward rate /S 0.5731 Current interest rates: US prime 4.3% -4.7% per annum UK LIBOR 5.3%-5.6% per annum a. Advice the management of Nix limited the possible outcome of using the forward contract to mitigate the forex risk exposed in the above transaction using the information given about the money market. (support your answer with calculations) (5 marks) b. Advice the management of Nix limited, the possible outcome of using the money market to hedge the forex risk exposed in the above transaction using the information given about the money market. (support your answer with calculations) (10 marks) c. Compare possible other methods available for mitigating the above Forex risk. (10 marks) (Total 25 marks) 2. Nix limited has $7 million 6% debentures in issue. They are redeemable in five years at a premium of 20%. Current market value = $130 and Corporation tax = 20% What is the post-tax cost of the debentures? (Use 5% and 10% discounting factor to in calculation of IRR) (15 marks) (Total 40 marks for section B) Section B (40 marks 1. Assume you work as the Finance manager for Nix limited. Nix Ltd is a US-based company manufacturing and selling Air conditioners in the US market. Nix Ltd exports its products to the United Kingdom. Nix Ltd is due to receive 9,000,000 in 3 months from a customer for the United Kingdom. You have been asked to mitigate the forex risk related to above stated transaction and you have collected the information related to money market. Spot Rate: /S 0.5432 3-month forward rate /S 0.5731 Current interest rates: US prime 4.3% -4.7% per annum UK LIBOR 5.3%-5.6% per annum a. Advice the management of Nix limited the possible outcome of using the forward contract to mitigate the forex risk exposed in the above transaction using the information given about the money market. (support your answer with calculations) (5 marks) b. Advice the management of Nix limited, the possible outcome of using the money market to hedge the forex risk exposed in the above transaction using the information given about the money market. (support your answer with calculations) (10 marks) c. Compare possible other methods available for mitigating the above Forex risk. (10 marks) (Total 25 marks) 2. Nix limited has $7 million 6% debentures in issue. They are redeemable in five years at a premium of 20%. Current market value = $130 and Corporation tax = 20% What is the post-tax cost of the debentures? (Use 5% and 10% discounting factor to in calculation of IRR) (15 marks) (Total 40 marks for section B)