MM Corporation wishes to borrow British pounds to finance its operations in England but believes he can obtain better terms on a dollar loan. Therefore, the Company issues $40 million of three-year 10 percent notes in the United States. At the same time MM arranges with a bank to swap its dollar borrowing for pounds based on the exchange rate of $1.60:1. Also, the bank agrees to pay MM sufficient dollars to service its dollar debt; in exchange MM agrees to pay an interest of 12 percent on the pounds received from the bank. Calculate the dollar cash flows and the pound cash flows for the company for years 0, 1, 2, and 3. Based on $1.60:1, $40 million should exchange for 25 million.

Please provide full explanation