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What is the effective after-tax cost of debt for one year

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Question - The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.6 million, a one-year period, an initial spot rate of SF1.4600/$, a 4.575% cost of debt, and a 30?% tax rate, what is the effective after-tax cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was:

a. SF1.4600/$

b. SF1.3900/$

c. SF1.3250/$

d. SF1.5520/$

Reference no: EM133025636

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