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please help with the attached corporate finance problem Problem 8-13 aff Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest
please help with the attached corporate finance problem
Problem 8-13 aff Lluvia and Paraguas. Lluvia Manufacturing and Paraguas Products both seek funding at the lowest possible cost Lluvia would prefer the flexibility of floating-rate borrowing, while Paraguas wants the security of fixed-rale borrowing Lluvia is the more creditworthy company They face the following rate structure Lluvia with the better credit rating, has lower borrowing costs in both types of borrowing Lluvia wants lloating-rate debt so it could borrow at LIBOR + 1000% However, it could borrow fixed at 9.000% and swap for floating-rate debt Paraguas wants fixed-rale debt, so it could borrow fixed at 13 000% However, it could borrow floating at me LIBOR + 2.000% and swap for fixed-rate debt What should they do? (LIBOR IS 6 000%) Bam Lluvia's comparative advantage is % (Round to three decimal places) Spm -7 eru
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