CHAPTER 10 Siam Cement, the Bangkok-based cement manufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy in the mid-1990s, taking on massive quantities of foreign currency denominated debt (primarily U.S. dollars). When the Thai baht (B)was devalued from its pegged rate of B25.0/in July 1997, Siam's interest payments alone were over $900 million on its outstanding dollar debt (with an average interest rate of 8.40% on its U.S. dollar debt at that time). Assuming Siam Cement took out $50 million in debt in June 1997 at 8.40% interest, and had to repay it in one year when the spot exchange rate had stabilized at B42.0/8, what was the foreign exchange loss incurred on the transaction? Assumptions US dollar debt taken out in June 1997 US dollar borrowing rate on debt Initial spot exchange rate, baht/dollar, June 1997 Average spot exchange rate, baht/dollar, June 1998 Value 50,000,000 8.400% 25 42