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The problems are tased on 15ed 10.7 Krystal Krystal is a US. based company that manufactures, sells, and invtalle water purification equipment. On April 11, the company sold a mstem to the Cify of Nagacaki. Japan, for instatlation in Naggaak's fenous Cloves Cardent (Where Puccini's Madarne Butterfly waited for the retum of t. Pinkertonl. The ale was priced in yen at V20,000,000, with payment due in three monthe. Note that the intesest sate differentials vary slighthy from the ferwasd discounts on the yen because of time differences for the quotes. The opot 7118.255/5, for example, is a mid-point range. On April 11, the spot yen raded in London from V113.30/$ to \$117.550/5. Aquatech's Japanese competitaes are currently boirowing yen from Japanese banks at a spread of two percenlege points above the japaneie moncy rate. Krystal's weighted average cost of capotal is 16%, and the company wilhes to protect the dollar value of this receivable. 3-month options are available from Kyush Buniz call option on $20,000,000 at exercise price of 7118.00/S: a 1% premium, or a put option on v20.000,000; at exercise price of Y118.00/5; a 3\% premium. a. What are the costs and benefits of altemative hedges? Which would you tecommend, and whv? b. What is the break-even reinvestment rate when comparing forward and money market alternatives