The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values...

The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.5 million, 3 one year period, an initial spot rate of SF1.5000/5, 3 5.000% cost of debt, and a 34% tax rate, what is the effective cost of debt for one year for a Uss. dollar-based company if the exchange rate at the end of the period was: 2. SF1.5000/5 b. SF1.4400/5 C. SF1.3860/ d. SF1.6240/5


Extracted text: The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.5 million, a one year period, an initial spot rate of SF1.5000/S, a 5.000% cost of debt, and a 34% tax rate, what is the effective cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was: a. SF1.5000/$ b. SF1.4400/S c. SF1.3860/$ d. SF1.6240/$