Suppose a U.S. company has a subsidiary in Japan that generates revenue in JPY. The company has a forecasted revenue of JPY 100,000,000 in 6 months. The current spot exchange rate is USD/JPY 110.50, and the 6-month forward exchange rate is USD/JPY 110.70. The company wants to hedge its currency risk by entering into a forward contract with a notional amount of JPY 100,000,000 and a 6-month maturity. The company's cost of funds is 4% per annum in the U.S. and 1% per annum in Japan. Calculate the fair value of the forward contract and the net cash flow for the company in USD if it enters into the forward contract.

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