McDougan Associates (USA). McDougan Associates, a U.S.-based investment partnership, borrows 85,000,000 at a time when the...
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McDougan Associates (USA). McDougan Associates, a U.S.-based investment partnership, borrows 85,000,000 at a time when the exchange rate is $1.3373 1.00. The entire principal is to be repaid in three years, and interest is 6.250% per annum, paid annually in euros. The euro is expected to depreciate vis--vis the dollar at 2.6% per annum. What is the effective cost of this loan for McDougan? Complete the following table to calculate the dollar cost of the euro-denominated debt for years 0 through 3. Enter a positive number for a cash inflow and negative for a cash outflow. (Round the amount to the nearest whole number and the exchange rate to four decimal places.) Proceeds from borrowing euros Interest payment due in euros Repayment of principal in year 3 Total cash flow of euro-denominated debt Expected exchange rate, $ = 1.00 Year 0 Year 1 Year 2 Year 3 85,000,000 (85,000,000) Dollar equivalent of euro-denominated cash flow 69 1.3373 $ 6A McDougan Associates (USA). McDougan Associates, a U.S.-based investment partnership, borrows 85,000,000 at a time when the exchange rate is $1.3373 1.00. The entire principal is to be repaid in three years, and interest is 6.250% per annum, paid annually in euros. The euro is expected to depreciate vis--vis the dollar at 2.6% per annum. What is the effective cost of this loan for McDougan? Complete the following table to calculate the dollar cost of the euro-denominated debt for years 0 through 3. Enter a positive number for a cash inflow and negative for a cash outflow. (Round the amount to the nearest whole number and the exchange rate to four decimal places.) Proceeds from borrowing euros Interest payment due in euros Repayment of principal in year 3 Total cash flow of euro-denominated debt Expected exchange rate, $ = 1.00 Year 0 Year 1 Year 2 Year 3 85,000,000 (85,000,000) Dollar equivalent of euro-denominated cash flow 69 1.3373 $ 6A
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