4. (15 points) A company based in Bangkok, Thailand considered two alternative loans offered from two different banks. At the time, the exchange rate of Thai bahts per one U.S dollar was 32.5. The first was a loan of 975 million Thai baht, which would be repaid in one year with 9% interest. The second was a loan of 30 million dollars, which would be repaid in one year with 7% interest. The companys management eventually decided to choose the second offer. One year later, the debt was paid back when the exchange rate was 34.0 bahts per dollar.

(a) In terms of Thai baht, what was the value of the amount received as a loan (using the exchange rate at the time it was received)?

(b) What was the value of the amount paid back (including the principal and interest) given the exchange rate at the time the payment was made?

(c) What is the cost of debt in percent that is implied by your answers to part (a) and part (b)?

(d) In retrospect, would the company be better off choosing the other loan instead of the one that was chosen? What turned out to be the Thai baht value of the difference between the two alternatives?