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The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what
The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SFmillion a oneyear period, an initial spot rate of SF$ a cost of debt, and a tax rate, what is the effective aftertax cost of debt for one year for a US dollarbased company if the exchange rate at the end of the period was:
a SF$
b SF$
c SF$
d SF$
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