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 25,000,000, 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 117.968/$, for example, is a mid-point range. On April 11, the spot yen traded in London from $119.284/8 to 116 652/$. 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 15%, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank. call option on 25,000,000 at exercise price of 117.000/$. a 1.9% premium, or a put option on 25,000,000, at exercise price of 117.000/$. a 3.1% 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 U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be 117 968/S? $211922 (Round to the nearest cent.) How much in US dollars will Krystal receive in 3 months with a forward market hedge? $ 214544.39 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a money market hedge? $ 24869513 (Round to the nearest cent) How much in US dollars will Krystal receive in 3 months with an option hedge if the expected spot rate in 3 months is assumed to be greater than 117.000/S? $ (Round to the nearest cent) do not guarantee the company of settling for the booked amount, but the do. In this case, the yields the higher certain The proceeds (Select from the drop-down menus.) unts com rang X ed av Data table 00 17.00 ure mol gei Spot exchange rate 117.968/$ (closing mid-rates) 1-month forward rate: 117 505/$, a 4.73% per annum premium 3-month forward 116.526/$, a 4.95% per annum premium 1-year forward 111.320/$, a 5.97% per annum premium Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet Money Rates United States Japan Differential One month 4.9125% 0.09625% 4.81625% Three months 4.9625% 0.09875% 4.86375% Twelve months 5.2125% 0.31375% 4.89875% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. ark arke edge Print Done the company of settling for the booked amount, but the do. In Krystal. Krystal is a US-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt Pinkerton). The sale was priced in yen at 25,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup window Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 117.968/$, for example, is a mid-point range. On April 11, the spot yen traded in London from $119.284/8 to 116 652/$. 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 15%, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank. call option on 25,000,000 at exercise price of 117.000/$. a 1.9% premium, or a put option on 25,000,000, at exercise price of 117.000/$. a 3.1% 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 U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be 117 968/S? $211922 (Round to the nearest cent.) How much in US dollars will Krystal receive in 3 months with a forward market hedge? $ 214544.39 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a money market hedge? $ 24869513 (Round to the nearest cent) How much in US dollars will Krystal receive in 3 months with an option hedge if the expected spot rate in 3 months is assumed to be greater than 117.000/S? $ (Round to the nearest cent) do not guarantee the company of settling for the booked amount, but the do. In this case, the yields the higher certain The proceeds (Select from the drop-down menus.) unts com rang X ed av Data table 00 17.00 ure mol gei Spot exchange rate 117.968/$ (closing mid-rates) 1-month forward rate: 117 505/$, a 4.73% per annum premium 3-month forward 116.526/$, a 4.95% per annum premium 1-year forward 111.320/$, a 5.97% 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 4.9125% 0.09625% 4.81625% Three months 4.9625% 0.09875% 4.86375% Twelve months 5.2125% 0.31375% 4.89875% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. ark arke edge Print Done the company of settling for the booked amount, but the do. In
