Required: Zeda Incorporated, a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of DKK14,950,000 at a rate of 4 percent per annum. The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone. The loan schedule calls for the principal to be repaid in three equal annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK 5.60 per $1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark. Note: Round the exchange rates to two decimal places. Round the intermediate calculations and final answer to nearest whole number. Present value of the benefit of the concessionary loan
Required: Zeda Incorporated, a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of DKK14,950,000 at a rate of 4 percent per annum. The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone. The loan schedule calls for the principal to be repaid in three equal annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK 5.60 per $1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark. Note: Round the exchange rates to two decimal places. Round the intermediate calculations and final answer to nearest whole number. Present value of the benefit of the concessionary loan
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 1ST
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Zeda Incorporated, a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has
offered Zeda a concessionary loan of DKK14,950,000 at a rate of 4 percent per annum. The normal borrowing rate is 6
percent in dollars and 5.5 percent in Danish krone. The loan schedule calls for the principal to be repaid in three equal
annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK 5.60
per $1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark.
Note: Round the exchange rates to two decimal places. Round the intermediate calculations and final answer to
nearest whole number.
Present value of the benefit of the concessionary loan
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