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McDougan Associates? (USA)


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


Interest payment due in euros




Repayment of principal in year 3









Total cash flow of euro-denominated debt






Expected exchange rate, $/€





Dollar equivalent of euro-denominated cash flow









Option 1

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5.94 USD


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Option 2

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