Question
The ABC Company, a U.S.-based MNC, plans to establish a subsidiary in Spain to manufacture and sell water pumps. ABC has total assets of $80
The ABC Company, a U.S.-based MNC, plans to establish a subsidiary in Spain to manufacture and sell water pumps. ABC has total assets of $80 million, of which $60 million is equity financed. The remainder is financed with debt. ABC considers its current capital structure optimal. The construction cost of the facility in Spain is estimated to be 8,500 million, of which 6,500 million is to be financed at a below-market rate of interest arranged by the Spanish government. The proposed project will increase the borrowing capacity by
A. 1,215 million. B. 2,125 million. C. 3,215 million. D. 4,215 million.
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