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please help with the attached finance problem regarding the effective cost of funds East Asiatic-Thailand. The East Asiatic Company (EAC), a Danish company with subsidianes
please help with the attached finance problem regarding the effective cost of funds
East Asiatic-Thailand. The East Asiatic Company (EAC), a Danish company with subsidianes throughout Asia has been funding its Bangkok subsidiary primarily with US dollar debt because of the cost and availability of dollar capital as opposed to Thai baht-denominated (B) debt The treasurer of EAC Thailand is considering a 1-year bank loan for $252,000 The current spot rate is B32 05/S and the dollar-based interest is 671% for the 1-year period 1-year loans are 12.04% in baht a. Assuming expected inflation rates for the coming year of 4 4% and 1 24% in Thailand and the United States respectively according to purchase power panity, what would be the effective cost of funds in Thai baht terms? b. If EAC's foreign exchange advisers believe strongly that the Thai government wants to push the value of the baht down against the dollar by 5% over the coming year (to promote its export competitiveness in dollar markets), what might be the effective cost of funds in baht terms? c. If EAC could borrow Thai baht at 13.00% per annum would this be cheaper than either part a or part b? Har narty what
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