ABC Limited (based in Germany) is a drug company that has attempted to capitalize on new opportunities to expand in Eastern Europe. The production costs in most Eastern European countries are very low, often less than one-fourth of the cost in Germany or Switzerland. Furthermore, there is a strong demand for drugs in Eastern Europe. ABC penetrated Eastern Europe by purchasing a 60 percent stake in Galena AS, a Czech firm that produces drugs. a) Should ABC finance its investment in the Czech firm by borrowing Euros that would then be converted into koruna (the Czech currency) or by borrowing koruna from a local Czech bank?

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