4 P G India Procter And Gamble S Affiliate In India P G India Procures Much Of Its Toiletries Product Line From A Ja 1 (40.97 KiB) Viewed 30 times
4 P G India Procter And Gamble S Affiliate In India P G India Procures Much Of Its Toiletries Product Line From A Ja 2 (16.67 KiB) Viewed 30 times
4. P&G India. Procter and Gamble's affiliate in India, P&G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. P&G India wishes to hedge an 8.5 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for com- panies like P&G India to work with a currency agent who will, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. Using the follow- ing exchange rate and interest rate data, recommend a hedging strategy.
Spot rate: 180-day forward rate Expected spot, 180 days 180-day Indian rupee investing rate 180-day Japanese yen investing rate Currency agent's exchange rate P&G India's cost of capital ¥120.60/$ ¥2.400/Rps ¥2.6000 8.000% 1.500% 4.850% 12.000%
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