User Account

All Pages

Explain the exact strategy

Assignment Help Financial Management
Reference no: EM133305503

Question

Cycle and Carriage (C-C), a Malaysian importer and distributor of Mercedes Benz cars have €15 million payable to Daimler - Benz of Germany, in 60 days. Given the problems in Europe, there has been extreme volatility in the MYR /EURO exchange rate. You have been asked to advise C-C on how best to handle this exposure. C-C is open to using either FX forward or FX Option contracts if necessary. You have been provided with the following information.

MYR/EURO Spot = RM4.05

MYR/EURO 30-day Forward = RM3.98

MYR/EURO 60-day Forward = RM3.825

MYR/EURO 90-day Forward = RM3.74

Fee for Forward = RM 5,000 flat rate

60-days Option Exercise Price = RM 3.825

Fee for 60-days RM3.825 exercise price Option = RM25, 000

1) Explain the exact strategy and the MYR amount to be locked in if forward is used.

2) Explain the exact strategy and the MYR amount to be locked in if the option is used.

3) Given the information in the case, discuss the best course of action.

Reference no: EM133305503

Questions Cloud

Cash flow estimates for capital project proposals : Most of the cash flow estimates for capital project proposals will be generated by the managers proposing the projects.
Identified by provincial or federal legislation : This language should be amended to state that employees will not be discriminate with respect to terms and conditions of employment on ground identified
Estimates for capital project proposals : Most of the cash flow estimates for capital project proposals will be generated by the managers proposing the projects.
Capital budgeting decisions important for business ?rm : Why are capital budgeting decisions important for a business ?rm? Discuss their concept and significance.
Explain the exact strategy : Explain the exact strategy and the MYR amount to be locked in if forward is used. Given the information in the case, discuss the best course of action.
About credit scores-perpetuating inequality : What are your own feelings about credit scores and how they are used in our society? Do you think they are accurate? Fair/just? Perpetuating inequality?
What are project npv and irr : A company just paid $10 million for a feasibility study. If the cost of capital for the project is 11 percent, what are the project's NPV and IRR?
Maintain sound ethics in audit profession : Discuss some of yours ethical responsibilities as an auditor, and strategies that you can employ to maintain sound ethics in the audit profession?
How much could it reduce its average inventory : If SOS can improve its inventory turnover to the industry average, then how much could it reduce its average inventory?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the value of this exchange to? you

You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.1 million Czech koruna today in exchange for a? year's supply of frozen shrimp. The cost of the shrimp from the Thai supplier in dollars is. The amount ..

  What is the risk premium for stock

What is the risk premium for Litchfield Design stock if the stock has a beta of 1.28, the expected return on the market is 16.06 percent, the risk-free rate is 3.95 percent, and inflation is 2.29 percent?

  What is the percentage change in price for each bond

What is the percentage change in price for each bond after the decline in interest rates?

  What is the total market value of debt

Total book value of debt $ 177000000 What is the total market value of debt? What is the aftertax cost of debt?

  What is the markup percentage for braided belts

What is the mark up percentage on an item that costs$183 a dozen and retails for $30.00 each. Determine the cost of a jacket that retails for $249 and has a 49% markup. What is the markup percentage for braided belts that cost $78.00 a dozen and reta..

  What are short-term liabilities

What are short-term liabilities and why are they so important to manage? Please use one example to illustrate your point.

  Additional cash flows-what is the npv of project

Cortez Art Gallery is adding to its existing buildings at a cost of $2 million. Given a required rate of return of 10 percent, what is the NPV of this project?

  Assuming other things are held constant

Garcia Industries has sales of $167,500 and accounts receivable of $18,500, how would that affect its net income, assuming other things are held constant?

  Risk-free rate of interest-market risk premium

Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 6%, and the market risk premium is 7%. Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $1.87 a..

  Switch to the proposed capital structure

What will be the level of expected EPS if they switch to the proposed capital structure?

  Compute the year six future value of deposits made in years

compute the year 6 future value of deposits made in years 1, 2, 3, and 4 of $1,750, $1,950, $1,950, and $2,250.

  Corporations can raise large amounts of money because

Corporations can raise large amounts of money because:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd