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Talishan Shoe Company (B). Talishan Shoe Company of Durham, North Carolina, has recelved an order for 50,500 cartons of athietic shoes from Southamplon Footware. Ltd. of England, payment to be in British pounds sterling. The shoes will be shipped to Southampton Footware undor the terms of a letior of credit issued by a Landon bank on behalt of Southampton Footware. The letter of credit specifies that the face value of the shipment, 2393,000 , will be poid 120 days after the London bank acoepts a draft drawn by Southampton Footware in accordance with the terms of the letter of credit. The current discount rate in London on 120 -day bankers' acceptances is 11.6% per annum, and Southampton Footware estimates its welghted average cost of capital to be 17.8% per annum. The commission for solling a bankers' acceptance in the discount market is 2.1% of the face amount. a. Would Talishan Shoe Company gain by holding the acceptance to maturity, as compared lo discounting the barkars' acceptance at once? b. Does Talishan Shoe Company incur any other risks in this transaction? 0. Assume that Great Britain charges an import duty of 9.6% on shoes imported into the United Kingdom. Talshan Shoe Compary discevers that it can manufacture shoes in Iroland and import them into Britain free of any import duty. What factors should Talishan consider in deciding to continuse to export shoos from North Carolina versus manufacture them in freland? (NOTE:Assume a 300 -day yeac) a. Would Talishan Shoe Company gain by hoiding the acoeptance to maturity, as compared to discounting the barkers' acceptance at once? Altemative 1: If Southampton Footware holds the draft for 120 days after the bank has accepted it, Talishan Shoe will received the face amount of f393,000. The present value of 393,000 received 120 days hence, discounted at Talishan Shoe's WACC is 4 (Round to two decimal places.)

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