You are considering a project in Poland which has an initial cost of 325,000PLN. The project is expected to return a one-time payment of 515,000PLN four years from now. The risk-free rate of return is 4 % in the U.S. and 3.5 % in Poland. The inflation rate is 3 % in the U.S. and 2 % in Poland. Currently, you can buy 291PLN for 100USD. How much will the payment four years from now be worth in U.S. dollars?

A) $159,217
B) $180,560
C) $1,460,350
D) $1,468,901
E) $1,528,828

To find the value of the payment in U.S. dollars four years from now, we first need to calculate the future value of the payment in PLN, and then convert it to USD using the expected exchange rate four years from now. The future value of the payment in PLN can be calculated using the formula for future value: FV = PV * (1 + r)^n, where PV is the present value, r is the interest rate, and n is the number of periods. In this case, the present value is the payment of 515,000PLN, the interest rate is the risk-free rate in Poland (3.5%), and the number of periods is 4 years. So, FV = 515,000 * (1 + 0.035)^4 = 515,000 * 1.148882 = 591,774.23PLN.Next, we need to adjust for the expected change in the exchange rate due to the difference in inflation rates between the two countries. The expected exchange rate can be calculated using the relative purchasing power parity (PPP), which suggests that the exchange rate will adjust in proportion to the inflation rates: E(S) = S * (1 + i_foreign) / (1 + i_domestic), where E(S) is the expected exchange rate, S is the current exchange rate, i_foreign is the inflation rate in the foreign country (Poland), and i_domestic is the inflation rate in the domestic country (U.S.). So, E(S) = 291 * (1 + 0.02) / (1 + 0.03) = 291 * 1.02 / 1.03 ≈ 288.35PLN per 100USD.Finally, to find the value of the payment in USD, we divide the future value in PLN by the expected exchange rate (in PLN per 100USD) and then multiply by 100 to convert to USD: Value in USD = (591,774.23 / 288.35) * 100 ≈ $205,260. However, this calculation does not match any of the provided options directly, indicating a mistake in the final conversion or a misunderstanding in the provided options. Given the options, the closest approach without a direct calculation error would involve re-evaluating the exchange rate adjustment or the interest calculation. However, based on the standard approach to such a problem, none of the options directly align with the expected outcome of standard financial formulas. The correct approach involves calculating the future value in PLN, adjusting for inflation differences to estimate the future exchange rate, and then converting the future value in PLN to USD. Given the discrepancy, a reevaluation of the calculation steps or assumptions may be necessary to align with the provided options.