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An Indian company, in its bid to improve the scale of operations, required a loan of US $300,000. The company's banker agreed to arrange the loan with a condition that the loan is to be repaid with interest, by making equated annual installments of US $112,000 at the end of each year for a period of three years after receipt of the loan. The current exchange rate of US dollar is Rs.47.70. The inflation rate in India is 4% and that in U.S. is 2.5%. The expected appreciation of rupee in the first year is 1% and for next two years expected depreciation of rupee is 2% and 3% respectively, on year-on- year basis. You are required to determine the effective cost of funds in rupees to the company