Business Finance Homework Help

want someone to rewrite these papers in new different words so I don’t get detected or get a plagiarism

2 pages

ozier Industries (A) & (B)With the results of going international, Dozier Industries faces multiple problems regard-ing the loss of potential revenue from currency risk. In order to help minimize risk, Rothschild the CFO was advised to take an option hedged action. This will minimize risk involved with the payout in the foreign currency. Currently Dozier’s new project will bring in 1,175,000Pounds which must be converted into U.S. dollars. This money will be paid in installments and the first installment of 10% of the contract 117,500Pounds was paid upfront. The second installment will not be paid until after the project it compete. Inflation in the dollar/pound has severe implicationsfor the profit of the project. Dozier now has two different options to choose from in order to min-imize risk/loss. The first would be to an option hedge and the second would be a forward hedge.The option hedge can be decided between a put option or a call option. Both will start with the purchase of 84 option contracts adding up to around 1,050,000Pounds. This would leaveonly 7,500 fully exposed to the exchange rate volatility. The put option will begin differently from the call option and will start with taking a put option contract, by then selling these options for $1.45/Pounds and of course adding a premium. With the put contract, Dozier is anticipating the falling of the British Pound. If the Pound does fall, Dozier will have successfully hedged compared to if the Pound was to increase, then Dozier will realist in a loss and the hedging would of been pointless. As for the Call Option, this would essentially be the opposite of the put contract and you would be buying options at a set amount and Dozier would be relying on the British Pound to increase. However if it doesn’t and depreciates then Dozier will loss more
money then good. After looking at the trends throughout the exchange rates, the trends suggest the Pound could continue to appreciate which would recommend Dozier to take a call option.The future hedge or contract will result in the creating of a 90day forward contract to sell Pounds at the forward rate of $1.4198/Pounds. This strategy however has more losses compared to the options method but can return a larger profit as well. Dozier should consider this future contract only ifDozier fears that doing nothing with their current current will result in a loss.The profit is calculated by adding the total receivable at the forward rate and the future value of the 10% deposit on the contract received. This may result in a small advantage but will do the job of protecting Dozier’s money.The final decision should fall onto the analysis of Dozier’s current situation and future path of the $/Pound currency rates. Looking into the future rates we can see that it would be the smartest move to engage in a forward contract. This could lead Dozier into a complete major lossof profit but ensures a positive profit margin in the end.