Question $114($Manaatory$)(6$ points$)$

TECHNOTHERM CORPORATION was founded in $1972$ by bringing together a skilled professional team

established in the field of waste heat recovery. Technotherm just executed a $3$ year contract with the State

of Germany to deliver $(10)$ Firetube Boilers to a state$-$owned entity. Each Boiler Technotherm constructs

can be built in Belgium or Tulsa, OK$.$ The cost of manufacturing is $2,750,000.$ The terms of the contract

specify that Technotherm must accept payment for the Boilers in Euro, which isn't a problem because

Technotherm maintains a multi$-$currency account in London and it holds plenty of $.$ It will take

Technotherm $3$ years to complete the construction and delivery of the Boilers. Technotherm's CFO looked

up the conversion rates of $\frac{\text{\$}}{}$ for today and in $3$ years. The Spot $\frac{\text{\$}}{}$ rate is $1\mathrm{.}05476$ and the $3$yr Forward

is $1\mathrm{.}10757.$ Also, the CFO checked the $30-$day and $90-$day LIBOR rates, which are $4\mathrm{.}22\%$ and $4\mathrm{.}73\%$

respectively. Three year SWAP rates are $3\mathrm{.}84\%$ for $30-$day LIBOR and $4\mathrm{.}83\%$ for $90$ day LIBOR.

Technotherm must borrow finance the construction of the Boilers. The company has two financing options:

USBANK:

$75\%$ of the cost of manufacturing

Interest only per annum, paid in monthly payments

Rate Options:

a$.30$ DAY LIBOR $+6\%$

b$.10\%$ FIXED FOR $3$ YEARS

DEUTCHE BANK:

$80\%$ of the

Interest only per annum, paid in quarterly payments

Rate Options:

a$.90$ DAY LIBOR $+5\%$

b$.9\%$ FIXED FOR $3$ YEARS

As a new graduate of the Meinders School of Business, you report to the CFO and are assigned to use the

data above to answer the following question:

What is the manufacturing cost of each Boiler and the total project cost in USD$-$today?