Your company is considering building a plant which produces coin-operated cappuccino machines in Japan.

Your company is considering building a plant which produces coin-operated cappuccino machines in Japan. The project costs ¥ 1,000,000 (year 0) and is expected to generate a cash flow of ¥ 500,000, ¥ 600,000, and ¥ 400,000 in the next three following years (years 1, 2, and 3; no cash flow is generated after year 3). Your company’s required dollar rate of return on projects of similar risk is 10%. Inflation in the US and Japan is expected to be 3% and 2%, and the current spot rate is ¥ 125/$. Assume that the international parity relations hold. Calculate the NPV of the project in dollars.

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