A US company is considering three financing plans for 1 year: a dollar loan at 6 percent;

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a Swiss franc loan at 3 percent; and a euro loan at 4 percent. The company has forecasted that the franc will appreciate by 2 percent for the next year and that the euro will appreciate by 3 percent for the same period.

(a) Compute the expected effective interest rate for each of the three plans.

(b) Which plan appears to be most feasible?

(c) Why might the company not necessarily choose the plan with the least interest rate?

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Global Corporate Finance Text And Cases

ISBN: 9781405119900

6th Edition

Authors: Suk H. Kim, Seung H. Kim

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Question Posted: May 23, 2024 02:00 AM

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A US company is considering three financing plans for 1 year: a dollar loan at 6 percent;

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Global Corporate Finance Text And Cases

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