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Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of
Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). The sale was priced in yen at 20,000,000, with payment due in three months. The exchange rate and interest rate data are shown as follows: Spot exchange rate: 118.255/$ (closing mid-rates) 1-month forward rate: 117.760/$, a 5.04% per annum premium 3-month forward: 116.830/$, a 4.88% per annum premium 1-year forward: 112.450/$, a 5.16% per annum premium 3-month options are available from Kyushu Bank: call option on 20,000,000 at exercise price of 118.000/$ : a 1% premium; or a put option on 20,000,000, at exercise price of 118.000/$ : a 3% premium. WACC is 16%. How much would Krystal receive if Krystal enters into an option hedge and exercises the option. Round to the nearest whole number
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