**Please answer in a complete and easy-to-read manner. Thank you!**

Problem 4.12 Lantau Beer (B): Japanese Yen Debt Lantau Beer of Hong Kong borrowed Japanese yen under a long-term loan agreement several years ago. The company's new CFO believes, however, that what was originally thought to have been relatively "cheap debt" is no longer true. What do you think? 2008 2009 2010 Analysis of Japanese yen-denominated Debt Annual yen payments on debt agreement () Average exchange rate, /HK$ 12,000,000 12.3 12,000,000 12.1 12,000,000 11.4 Annual yen debt service, HK$ 975,610 The analysis of debt service payments on the Japanese yen-denominated long-term loan indicates that for the past two years the effective cost of repaying the loan, in Hong Kong dollars, has been steadily rising as the Hong Kong dollar has fallen in value against the Japanese yen. In fact, the Japanese yen debt has not proven to be as cheap as thought