Question: IBM is considering having its German affiliate issue a 10-year, US$100 million bond denominated in euros and period to yield 7.5%. Alternatively, IBMs German unit

IBM is considering having its German affiliate issue a 10-year, US$100 million bond denominated in euros and period to yield 7.5%. Alternatively, IBMs German unit can issue a dollar-denominated bond of the same size and maturity and carrying an invest rate of 6.7%

(1) Suppose IBMs German unit faces a 35% corporate tax rate. What is the expected after-tax dollar cost of the euro-dominated bond?

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