A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
Chapter21: International Cash Management
Section: Chapter Questions
Problem 3BIC
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- A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
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