One of the incentives provided by Cambodia to attract Adidas into setting up a local production facility is an 8-year, USD27 million loan at 6.95%. The principal is to be repaid at the end of the 8^th year. The market interest rate on such a loan is 12.74%. With a marginal tax rate of 18.5%, how much is this loan worth to Adidas?

a.

USD1.274 million

b.

USD1.563 million

c.

USD6.703 million

d.

USD8.018 million

e.

None of the options in this question are correct.