Where should the abc firm borrow

Reference no: EM13300102

US based ABC firm wants to raise $20 million. It can choose from borrowing a US loan @ 10% interest loan annually, euro loan @ 15%, yen loan @ 6%.

It expects the euro to depreciate 6% against the $ annually, and the yen to appreciate 2% against the $. Find the effective cost of the euro and the yen loans. Where should the ABC firm borrow, and explain why?

Reference no: EM13300102

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