Zeda, Inc., a U.S. MNC, is considering making a fixed direct investment in Denmark.The Danish government has offered Zeda a concessionary loan of DKK15,000,000 at a rate of 4 percent per annum.The loan schedule calls for the principal to be repaid in three equal annual installments.The interest payments for each installment are also required to be settled annually.

Year

(t)

Principal

Repayment

DKK

Interest Payment

DKK

1

5,000,000

600,000

2

5,000,000

400,000

3

5,000,000

200,000

The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone.The current spot rate is DKK5.60/$1.00 and the expected inflation rate is 3% in the U.S. and 2.5% in Denmark. What is the present value of the benefit of the concessionary loan?