An Australian firm wishes to borrow CAD 100 million for 10 years to fund an investment in Canada that matures in 12 years. The current exchange rate is AUD/CAD 1.25. The company expects to use the annual net profit of CAD 25-50 million to fund its interest and principal payments. In a rising rate environment, the firm is able to lock in a fixed interest rate of 2.95% from its Australian lender. A Canadian lender is willing to provide a floating rate CAD loan at 235 basis points over the Bank of Canada benchmark lending rate of 0.5%, offering an all-in interest rate cap of 6.00% with a 75 bps premium. What should the company do to manage its foreign exchange exposure?
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