Krystal. Krystal is a US-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 22,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup Window Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 117 850/$, for example, is a mid-point range. On April 11, the spot yen traded in London from Y118.824/$ to 1116.875/$. Krystal's Japanese competitors are currently borrowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 16.5%, and the company wishes to protect the dollar value of this receivable 3-month options are available from Kyushu Bank: call option on V22,000,000 at exercise price of 117 000/$a 11% premium, or a put option on V22,000,000, at exercise price of 117.000/$: a 3.3% premium a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forward and money market alternatives? a. How much in US dollars will Krystal receive in 3 months without a hedge of the expected spot rate in 3 months is assumed to be Y117.850/S? S (Round to the nearest cent) - mpany NOVILIUS, , NU and water purinduur equipment Un April, the company sold as tallation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). payment due in three months. The exchange rate and interest rate data are shown in the popup window: e differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot X1 April 11, the spot yen traded in London from Y118.824/$ to \116.875/$. Krystal's Japanese competitors are currently bo read of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 16.5%, and t of this receivable ailable from Kyushu Bank: call option on W22,000,000 at exercise price of 117.000/$: a 1.1% premium; or a put option on 1000/$. a 3.3% premium and benefits of a ven reinvestmen Bollars will Krystal A Data Table 117.850/$? earest cent.) Spot exchange rate 117.850/$ (closing mid-rates) 1-month forward rate: 117.366/$, a 4.95% per annum premium 3-month forward 116.505/$, a 4.62% per annum premium 1-year forward 112.617/$, a 4.65% per annum premium Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Money Rates United States Japan Differential One month 4.9000% 0.09500% 4.80500% Three months 4.9500% 0.09625% 4.85375% Twelve months 5.4500% 0.31375% 5.13625% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. in the answer box Print Done Clear All Check Ans Krystal. Krystal is a US-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). The sale was priced in yen at 22,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup Window Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 117 850/$, for example, is a mid-point range. On April 11, the spot yen traded in London from Y118.824/$ to 1116.875/$. Krystal's Japanese competitors are currently borrowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 16.5%, and the company wishes to protect the dollar value of this receivable 3-month options are available from Kyushu Bank: call option on V22,000,000 at exercise price of 117 000/$a 11% premium, or a put option on V22,000,000, at exercise price of 117.000/$: a 3.3% premium a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forward and money market alternatives? a. How much in US dollars will Krystal receive in 3 months without a hedge of the expected spot rate in 3 months is assumed to be Y117.850/S? S (Round to the nearest cent) - mpany NOVILIUS, , NU and water purinduur equipment Un April, the company sold as tallation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). payment due in three months. The exchange rate and interest rate data are shown in the popup window: e differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot X1 April 11, the spot yen traded in London from Y118.824/$ to \116.875/$. Krystal's Japanese competitors are currently bo read of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 16.5%, and t of this receivable ailable from Kyushu Bank: call option on W22,000,000 at exercise price of 117.000/$: a 1.1% premium; or a put option on 1000/$. a 3.3% premium and benefits of a ven reinvestmen Bollars will Krystal A Data Table 117.850/$? earest cent.) Spot exchange rate 117.850/$ (closing mid-rates) 1-month forward rate: 117.366/$, a 4.95% per annum premium 3-month forward 116.505/$, a 4.62% per annum premium 1-year forward 112.617/$, a 4.65% per annum premium Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Money Rates United States Japan Differential One month 4.9000% 0.09500% 4.80500% Three months 4.9500% 0.09625% 4.85375% Twelve months 5.4500% 0.31375% 5.13625% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. in the answer box Print Done Clear All Check Ans