Assume you are the CFO of AIFS. Your analyst reports the following information (Use the following...

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Finance

Assume you are the CFO of AIFS. Your analyst reports thefollowing information (Use the following information for theremainder of the assignment):
• Current exchange rate is $1.16/€.
• Forward rate is $1.185/€.
• Expected final sales volume is 30,000. Worst case scenario isvolume of 10,000. Best case scenario is volume of 36,000
. • Cost per student is €2500.
• Option premium is 2% of USD strike price.
• Option strike price is $1.165/€.
As the CFO, you decided to hedge using option contracts.Assuming expected final sales volume is 30,000, what are your totalbenefit/cost and the percentage benefit/cost from hedging (comparedto no hedging)
No hedging at $1.16/€= $87,000,000
No hedging at $1.25/€= $93,750,000
No hedging at $1.08/€= $81,000,000
Show full working solutions
a) if the exchange rate remains at $1.16/€?
b) if the exchange rate will be $1.25/€?
c) if the exchange rate will be $1.08/€?

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Solution Expected Sales Volume 30000 Cost per Student 2500 Euro Expected Sales 75000000 75 Million Euro Option Stike Price 1165 Euro Option premium 2 Option premium in 00233 Strategy for Hedging As AIFS is going to receive cash flows in Euros to protect dollar amount of See Answer

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Assume you are the CFO of AIFS. Your analyst reports thefollowing information (Use the following information for theremainder of the assignment):• Current exchange rate is $1.16/€.• Forward rate is $1.185/€.• Expected final sales volume is 30,000. Worst case scenario isvolume of 10,000. Best case scenario is volume of 36,000. • Cost per student is €2500.• Option premium is 2% of USD strike price.• Option strike price is $1.165/€.As the CFO, you decided to hedge using option contracts.Assuming expected final sales volume is 30,000, what are your totalbenefit/cost and the percentage benefit/cost from hedging (comparedto no hedging)No hedging at $1.16/€= $87,000,000No hedging at $1.25/€= $93,750,000No hedging at $1.08/€= $81,000,000**Show full working solutions**a) if the exchange rate remains at $1.16/€?b) if the exchange rate will be $1.25/€?c) if the exchange rate will be $1.08/€?