You have an investment opportunity in Japan. It requires an investment of $ 0.95$0.95 million today and
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Question:
You have an investment opportunity in Japan. It requires an investment of $ 0.95$0.95
million today and will produce a cash flow ofyen 101101
million in one year with no risk. Suppose therisk-free interest rate in the United States is 3.5 %3.5%,
therisk-free interest rate in Japan is 2.5 %2.5%,
and the current competitive exchange rate is yen 110110
per dollar. What is the NPV of thisinvestment? Is it a goodopportunity?
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