Zlick Company plans to invest $20 million in Chile to expand its subsidiarys manufacturing output. Zlick has

Question:

Zlick Company plans to invest $20 million in Chile to expand its subsidiary’s manufacturing output. Zlick has two options. It can convert the $20 million at the current of 410 pesos to a dollar (i.e., P410/$1), or it can engage in a debt-for-equity swap with its bank, City Bank, by purchasing Chilean debt and then swapping that debt into Chilean equity investments.
a. If City Bank quotes bid-offer prices of 94-96 for Chilean loans, what is the bank expecting to receive from Zlick (ignore taxes)? Why would City Bank want to dispose of this loan?
b. If Zlick decides to purchase the debt from City Bank and convert it to equity, it will have to exchange it at the official rate of P400/$1. Is this option better than investing directly in Chile at the free market rate of P410/$1?
c. What official will cause Zlick to be indifferent between the two options? Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...