1. What is the amount, in baht, that Blades needs to borrow to cover the payments due to the Thai suppliers? What is the amount, in yen, that Blades needs to borrow to cover the payments due to the Thai suppliers?
2. Given that Blades will use the receipts from the receivables in Thailand to repay the loan and that Blades plans to remit all baht-denominated cash flows to the U.S. parent whether it borrows in baht or yen, does the future value of the yen with respect to the baht affect the cost of the loan if Blades borrows in yen?
3. Using a spreadsheet, compute the expected amount (in U.S. dollars) that will be remitted to the United States in 6 months if Blades finances its working capital requirements by borrowing baht versus borrowing yen. Based on your analysis, should Blades obtain a yen- or baht-denominated loan?

MINI CASE

Blades, Inc., just received a special order for 120,000 pairs of “Speedos,” its primary roller blade product. Ben Holt, Blades’ chief financial officer (CFO), needs short-term financing to finance this large order from the time Blades orders its supplies until the time it will receive payment. Blades will charge a price of 5,000 baht per pair of Speedos. The materials needed to manufacture these 120,000 pairs will be purchased from Thai suppliers. Blades expects the cost of the components for one pair of Speedos to be approximately 3,500 baht in its first year of operating the Thai subsidiary. Because Blades is relatively unknown in Thailand, its suppliers have indicated that they would like to receive payment as early as possible. The customer that placed this order insists on open account transactions, which means that Blades will receive payment for the roller blades approximately 3 months subsequent to the sale. Furthermore, the production cycle necessary to produce Speedos, from purchase of the materials to the eventual sale of the product, is approximately 3 months. Because of these considerations, Blades expects to collect its revenues approximately 6 months after it has paid for the materials, such as rubber and plastic components, needed to manufacture Speedos.