#5

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, aone-year period, an initial spot rate of SF1.5100/$, a 4.824% cost ofdebt, and a 34% taxrate, what is the effectiveafter-tax cost of debt for one year for a U.S.dollar-based company if the exchange rate at the end of the periodwas:

a. If the exchange rate at the end of the period was SF1.5100/$, what is the effectiveafter-tax cost ofdebt?

(Round to four decimalplaces.)

b. If the exchange rate at the end of the period was SF1.4600/$, what is the effectiveafter-tax cost ofdebt?

(Round to four decimalplaces.)

c. If the exchange rate at the end of the period was SF1.4170/$, what is the effectiveafter-tax cost ofdebt?

% (Round to four decimalplaces.)

d. If the exchange rate at the end of the period was SF1.6450/$, what is the effectiveafter-tax cost ofdebt?

% (Round to four decimalplaces.)