You have an investment opportunity in Japan. It requires an investment of 1.00 million today and will produce a cash flow of yen ¥114 million in one year with no risk. Suppose the risk-free interest rate in the United States is 4.0%, the risk-free interest rate in Japan is 2.0%,and the current competitive exchange rate is yen ¥110 per dollar.
- What is the NPV of this investment?
- Is this investment a good opportunity?