McDougan Associates (USA).McDougan Associates, a U.S.-based investment partnership, borrows

80,000,000

at a time when the exchange rate is

$1.3447/.

The entire principal is to be repaid in three years, and interest is

6.850%

per annum, paid annually in euros. The euro is expected to depreciate vis--vis the dollar at

2.6%

per annum. What is the effective cost of this loan for McDougan?

Complete the following table to calculate the dollar cost of the euro-denominated debt for years 0 through 3. Enter a positive number for a cash inflow and negative for a cash outflow.(Round the amount to the nearest whole number and the exchange rate to four decimal places.)

		Year 0		Year 1		Year 2		Year 3
Proceeds from borrowing euros		80,000,000
Interest payment due in euros
Repayment of principal in year 3								(80,000,000)
Total cash flow of euro-denominated debt
Expected exchange rate, $/		1.3447
Dollar equivalent of euro-denominated cash flow	$		$		$		$

What is the effective cost of this loan for McDougan?

nothing%

(Round to two decimal places.)