4. (20 points) A U.S based company reached an agreement to sell a large quantity of equipment to a Japanese buyer. The sale created a receivable of 7 billion Japanese yen () due in 12 months. The following quotes are available to the company:

Bid and ask quotes for the current spot rate (yens per one dollar) 112.0/$ and 115. 0/$

Bid and ask quotes for the 12-month forward rate (yens per one dollar) 109.0/$ and 113.0/$

Dollar interest rate offered on deposits 3.00% per year

Dollar denominated borrowing rate 5.50% per year

Yen interest rate offered on deposits 1.00% per year

Yen denominated borrowing rate 3.50% per year

The company is considering two alternative ways to fully hedge the exchange rate risk associated with the receivable (a "forward hedge" and a "money-market hedge").

(a) What are the transactions that the company would make to implement the forward hedge? Describe each transaction including the amounts, currencies, and timing of every cash flow involved in it.

(b) What are the transactions that the company would make to implement the money-market hedge? Describe each transaction including the amounts, currencies, and timing of every cash flow involved in it.

(c) Calculate which of the two is preferable if the company uses a Weighted Average Cost of Capital (WACC) rate of 12.0% to discount future cash flows.