Suppose the following conditions prevail:

                                                   U.S.     Germany

corporate income tax rate     21%        32%

corporate bond yields            4%            3%

and the expected rate of euro appreciation against the dollar is 2%/year. From the perspective of a U.S. corporation with a German branch, identify the following costs of debt (in dollar terms):

1. The after-tax cost of dollar debt issued in the U.S.;
2. The expected after-tax cost of euro debt issued in the U.S.;
3. The expected after-tax cost of euro debt issued in Frankfurt.

Answer rating: 100% (QA)

Sum No 4 after tax COst of dabt issued ... View the full answer