SK. Saha, Inc., has been approached by the government of Bangladesh to engage in a project there over the next year. SK. Saha Inc. would need to invest 4 million BDT in the project now, and the project is expected to generate cash flows of BDT 4.5 million next year. The project will terminate at that time. The current value of the BDT 80/$, but SK. Saha believes that the BDT will depreciate and have a value of BDT 85/$ next year. SK. Saha Inc. will finance this project from its retained earnings. However, SK. Saha Inc. has opportunity to engage with the BD government a parallel loan agreement. Both parties will repay the loans at the end of one year when the project is completed. Assume that next year SK. Saha Inc. will repay the loan plus 12 percent interest to the BD government, while the BD government repays its loan plus 9 percent interest to SK. Saha Inc.

Requirement: What will be the best financing decision for SK. Saha Inc. regarding this investment opportunity? Why

Answer rating: 100% (QA)

To determine the best financing decision for SK Saha Inc we need to compare the costs and benefits of financing the project through retained earnings ... View the full answer