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 SF 1.6 million, a one-year period, an initial spot rate of SF 1.4600/$, a 4.934% cost of debt, and a 38% 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. 1.4600SF/$

b. 1.4000SF/$

c. 1.3350SF/$

d. 1.5730SF/$