What is the effective? after-tax cost of debt for one year

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Foreign Exchange Risk and the Cost of Borrowing Swiss Francs

Problem 1: 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 SF1.5 ?million, a? one-year period, an initial spot rate of SF1.4800?/$, a 5.262?% cost of? debt, and a 35?% tax? rate, what is the effective? after-tax cost of debt for one year for a U.S.? dollar-based company if the exchange rate at the end of the period? was:

Option 1: SF1.4800?/$

Option 2: SF1.4400?/$

Option 3: SF1.3970?/$

Option 4: SF1.6150?/$

Reference no: EM132809782

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