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A NZ-based firm is considering a capital budgeting project in Japan. Suppose that the spot exchange rate is 71.65 JPY per NZD and that the
A NZ-based firm is considering a capital budgeting project in Japan. Suppose that the spot exchange rate is 71.65 JPY per NZD and that the one-year forward exchange rate is 70.85 JPY per NZD. The discount rate is 7% in New Zealand. What is the discount rate that should be used in Japan on yen-denominated cash flows? Show your calculations.
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