Dell wants to finance its international expansion by obtaining financing in the Euromarkets. ANZ and Westpac each offer a $100 million, three-year Eurodollar loan with the following characteristics:

FeeInterestANZ1%1%Westpac 0.88% 1.44%

What are the present values of each loan, and which should Dell choose? Assume Dell has a 9% discount rate and debt payments are made on an annual basis.

Answer

a.

The NPV of ANZ's loan is 3.5313 million, the NPV of Westpac's loan is 3.1075 million; Dell should choose ANZ.

b.

The NPV of ANZ's loan is 3.5313 million, the NPV of Westpac's loan is 3.1075 million; Dell should choose Westpac.

c.

The NPV of ANZ's loan is 3.5313 million, the NPV of Westpac's loan is 4.5251 million; Dell should choose Westpac.

d.

The NPV of ANZ's loan is 3.9410 million, the NPV of Westpac's loan is 5.0785 million; Dell should choose ANZ.

e.

The NPV of ANZ's loan is 3.5313 million, the NPV of Westpac's loan is 4.5251 million; Dell should choose ANZ.