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P&G: Net USD cash flow amount; cost of acquiring one US dollar

P&G is a US based MNC and has operations in Turkey. P&G expects 120,000,000 TRL cash flows in 6 months, however due to significant volatility, cash flows are expected to fluctuate as much as 20%. In other words P&G can get TRL120m, TRL96m or TRL144m depending on the economic conditions. Based on their expectations, P&G treasurers choose to sell TRL96m forward at TRL1.90and buy TRL48m put option at TRL1.90 both with six month maturities. The cost of the put option is $0.02. Assume that the spot exchange rate turns out to be TRL2.10/$ at the expiration and cash flows materialize as TRL144,000,000. What will the net USD cash-flows of P&G and what will be the cost of acquiring one US dollar?

a. 50,526,316 and TRL1.9000/$
b. 25,263,158 and TRL1.9200/$
c. 74,829,474 and TRL1.924/$
d. None of the above

Please pick the right answer and show the calculation.

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ANSWER: d. None of the above ...

Solution Summary

The following posting helps with calculations involving cash flow amounts and dollar aquisitions.