Mauna Loa Macadamia. Mauna Loa Macadamia, a macadamia nut subsidiary of Hershey's with plantations on the slopes of its namesake volcano in Hilo, Hawaii, exports macadamia nuts worldwide. The Japanese market is its biggest export market, with average annual sales invoiced in yen to Japanese customers of yen1 comma 440 comma 000 comma 000. At the present exchange rate of yen129 /$, this is equivalent to $11 comma 162 comma 791. Sales are relatively equally distributed throughout the year. They show up as a yen 30 comma 000 comma 000 account receivable on Mauna Loa's balance sheet. Credit terms to each customer allow for 60 days before payment is due. Monthly cash collections are typically yen120 comma 000 comma 000. Mauna Loa would like to hedge its yen receipts, but it has too many customers and transactions to make it practical to sell each receivable forward. It does not want to use options because they are considered to be too expensive for this particular purpose. Therefore, they have decided to use a "matching" hedge by borrowing yen. Assume the annual interest rate on the loan is 3.50 %.
How much should Mauna Loa borrow in U.S. dollars?