25. A US company borrows Mexican pesos for one year at 30 percent. During the year, the peso depreciates 15 percent against the dollar. The US tax rate is 35 percent. What is the after-tax cost of this debt in US dollar terms?

0 votes

asked 12 years ago in Economics by anonymous

Need the solution FAST? Than SHARE this question: Tweet

0 Answers

Related questions

0 votes

0 answers

36. A US company borrows Swiss francs for one year at 8 percent. The Swiss franc is expected to depreciate by 6 percent against the dollar for one year. What is the effective interest rate of the loan in US dollar terms?

asked 12 years ago in Economics by anonymous

0 votes

0 answers

13. A multinational company is considering the establishment of a two-year project in Germany with a $8 million initial investment. The company's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project with no salvage value after two years is expected to generate net cash flows of 12 million euros in year 1 and 30 million euros in year 2. Assume no taxes and a stable exchange rate of $0.60 per euro. What is the net present value of the project in dollar terms?

asked 12 years ago in Economics by anonymous

0 votes

0 answers

37. A US company borrows British pounds for one year at 6 percent. The US one-year interest rate is 8 percent. The one-year forward rate of the pound is $1.93. The spot rate of the pound at the beginning is $1.95. The pound's spot rate is $2.05 by the end of the year. Based on the information, compute the percentage change in pound and the effective interest rate of the loan in US dollar terms.

asked 12 years ago in Economics by anonymous

0 votes

0 answers

27. Assume that the debt ratio is 60 percent, the cost of debt is 6 percent, the cost of equity is 10 percent, the tax rate is 50 percent, and annual earnings after taxes are $10,000 for a multinational company. What are the company's weighted average cost of capital and its market value?

asked 12 years ago in Economics by anonymous

0 votes

0 answers

25. A US firm is considering the acquisition of a Mexican company for $2 million. The cost of capital for the US firm is 10 percent. The Mexican company has expected cash flows of $90,000 per year. The synergistic benefits of the merger will add $30,000 per year to net cash flow. What is the present value of net cash flows from this merger?

asked 12 years ago in Economics by anonymous