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Suppose Alpha S.A., the French subsidiary of a U.S.-based multinational, borrows 10 million for one year at an interest rate of 7%. Current exchange rate

Suppose Alpha S.A., the French subsidiary of a U.S.-based multinational, borrows 10 million for one year at an interest rate of 7%. Current exchange rate is $1.47/ and end of the year exchange rate is $1.41/.

a.Calculate the dollar cost of loan.

b.What happens to the cost of loan if tax rate is 40%?

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