1. The following items are components of a traditional balance sheet. How much are the total assets of the firms? Plan and Equipment $40,900 Common Stock 15,000 Cash 7,300 Inventory 21,800 Bad debt reserve 6,000 Paid in excess 6,000 Accumulated depreciation 26,200 Accounts receivable 22,000.
2. You are CFO of FlyByNight, Inc. and you are trying to decide whether to hedge foreign currency receivables and payables. One member of your team strongly favors forward contracts while another feels strongly about options. In addition, other team members are ambivalent. What are the advantages and disadvantages of both forward contracts and options? What method do you recommend, if any? You must support your answer.