Homework answers / question archive / McDougan Associates? (USA)

McDougan Associates? (USA)

Finance

Share With

---

McDougan Associates? (USA).  McDougan? Associates, a? U.S.-based investment? partnership, borrows €75,000,000 at a time when the exchange rate is ?$1.3423?/€. The entire principal is to be repaid in three? years, and interest is 6.150?% per? annum, paid annually in euros. The euro is expected to depreciate? vis-à-vis the dollar at 3.1?% per annum. What is the effective cost of this loan for? McDougan?

Complete the following table to calculate the dollar cost of the? euro-denominated debt for years 0 through 3. Enter a positive number for a cash inflow and negative for a cash outflow.  ?(Round the amount to the nearest whole number and the exchange rate to four decimal? places.)

 

 

Year 0

 

Year 1

 

Year 2

 

Year 3

Proceeds from borrowing euros

€

75,000,000

Interest payment due in euros

€

 

€

 

€

 

Repayment of principal in year 3

 

 

 

 

 

 

 

(75,000,000)

Total cash flow of euro-denominated debt

€

 

€

 

€

 

€

 

 

Expected exchange rate, $/€

1.3423

 

 

 

Dollar equivalent of euro-denominated cash flow

$

 

$

 

$

 

$