Question: Ford can borrow dollars at 12 or pesos at 80

Ford can borrow dollars at 12% or pesos at 80% for one year. The peso: dollar exchange rate is expected to move from $1 = Ps 3300 currently to $1 = Ps 4500 by year's end.
a. What is the expected after-tax dollar cost of borrowing dollars for one year if the Mexican corporate tax rate is 53%?
b. What is Ford's expected after-tax dollar cost of borrowing pesos for one year?
c. At what end-of-year exchange rate will the after-tax peso cost of borrowing dollars equal the after-tax peso cost of borrowing pesos?


View Solution:


Sale on SolutionInn
Sales0
Views194
Comments
  • CreatedJune 27, 2014
  • Files Included
Post your question
5000