Question
Foreign Exchange Risk and the Cost of Borrowing Swiss Francs. The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up
Foreign Exchange Risk and the Cost of Borrowing Swiss Francs. 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 SF1.3 million, a one-year period, an initial spot rate of SF1.4700/$, a 5.125% cost of debt, and a 30% tax rate, what is the effective after-tax cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was:
a. SF1.4700/$ i have the answer to this one which is 3.5875% but cant seem to figure out how to do the rest of them
b. SF1.4100/$
c. SF1.3780/$
d. SF1.5620/$
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