Princess Cruise Company (PCC), based in the US, purchased a ship from Mitsubishi Heavy Industry from Japan. PCC owes Mitsubishi JPY500 million (Japanese Yen) payable in one year. The current spot rate is USD/JPY124 and the one-year forward rate is USD/JPY110. The lending interest rate is 5% in Japan and 8% in the U.S. The borrowing rate is 6% in Japan and 9% in the US. PCC can also buy a one-year call option on JPY at the strike price of USD/JPY123 for a premium of 1.4%, or a one-year put option on JPY at strike price of USD/JPY126 for a premium of 1.8%. The cost of capital for PCC is equal to the US interest rate of 8%.

A) Compute the future dollar costs of meeting this obligation using the forward market.