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Question 8.3: Extend the previous XYZ/DYA example. DYA’s owners are asking...

Extend the previous XYZ/DYA example. DYA’s owners are asking €800,000 for the business. Assume the time-0 actual spot FX rate is 1.80 $/€ and the time-0 intrinsic spot FX rate is 1.50 $/€. XYZ believes that the temporary overvaluation of the euro will be corrected before the time-1 cash flow arrives. Find the NPV of XYZ’s proposed acquisition in euros and in U.S. dollars.

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