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Calculate the effective cost of the loan

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Atlanta Company needs to raise 400.000 euros and it decides to ask for a loan in dollars: The features of the loan are the following; o Maturity: 2 years o Fixed interest rate of 4% o Repayment method: even amortization payments o Exchange rate when the loan is granted: $1,25/€

a. Calculate the effective cost of the loan, supposing that at the end of each year the exchange rate was $1,20/€ and $1,15/€.

b. Calculate the effective cost of the loan, supposing that at the end of each year the exchange rate was $1,30/€ and $1,35/€.

c. If the company pays a tax rate of 30%, what would be the effective cost after taxes in each case (a and b).

Reference no: EM132779937

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