You are the financial manager of Ashdown plc: a US company which has just signed a...
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You are the financial manager of Ashdown plc: a US company which has just signed a contract for the sale of a computer system in the UK for £3,000,000 in a year's time. You have collected the following data relevant to this project Spot exchange rate: $1.2 = £1. One year forward exchange rate $1.4 = £1 UK one year interest rate 8% US one year interest rate 10% Price of a put option for £3,000,000 at an exercise price of $1.3 per pound: £400,000 Required: (1) How should Ashdown manage the risk arising out of this contract? Discuss and evaluate at least three choices. What is your recommended strategy? Give reasons for your answer. Your answer needs to include all calculations. You are the financial manager of Ashdown plc: a US company which has just signed a contract for the sale of a computer system in the UK for £3,000,000 in a year's time. You have collected the following data relevant to this project Spot exchange rate: $1.2 = £1. One year forward exchange rate $1.4 = £1 UK one year interest rate 8% US one year interest rate 10% Price of a put option for £3,000,000 at an exercise price of $1.3 per pound: £400,000 Required: (1) How should Ashdown manage the risk arising out of this contract? Discuss and evaluate at least three choices. What is your recommended strategy? Give reasons for your answer. Your answer needs to include all calculations.
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Answer rating: 100% (QA)
US company exporter account receivable 3000000 I forward rate 14 1 amount received 300000014 420000... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 9780273713630
13th Revised edition
Authors: James van Horne, John Wachowicz
Posted Date:
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