Pepper Corp. wants to finance an investment worth an amount equivalent to USD 114 million. It can borrow fixed-rate JPY at a rate of 4.65%, or it can borrow floating-rate USD at LIBOR + 0.21%.

Truffles Corp. also faces a USD 114 million investment, and it can borrow fixed-rate JPY at a rate of 4.73%, or it can borrow floating-rate USD at LIBOR + 0.87%.

If Pepper Corp. would like to borrow fixed-rate JPY and Truffles Corp. would like to borrow floating-rate USD, what are the possible cost savings to Pepper Corp. in JPY terms from a swap agreement between the two firms? Assume all cost savings accrue to Pepper Corp.

Assume the current exchange rate is JPY64/USD.

Select one:

a. 42.3168 million

b. 0.0103 million

c. 48.1536 million

d. 5.8368 million

e. There are no cost savings to Pepper Corp. from a swap.