A company operating in Latvia is planning to invest $10 millions in factory building. Money is taken for 4 years. Grace period is 24 months. Company sales are 20% in Euros and 80% in Dollars. In 4 years all sales are forecasted in Euros.
Options:
• In LVL for 6 months-Rigibor+1.2%
• In USD for 6 months – Libor+0.7%
• In Euros for 6 months-Euribor-0.3%
Questions
1. Borrow in 1 grant or 4 equal installments?
2. In which currency to borrow?
3. What derivatives to hedge?
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