TropiKana Inc

question 47

Multiple Choice

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, what is the before tax cost of capital if the firm repays the entire loan plus interest (rounded) ?

• A) 1.73%
• B) 5.50%
• C) 10.50%
• D) 9.27%

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Definitions:

Metacarpals

The five long bones in the hand that connect the wrist bones to the bones of the fingers and thumb, forming the palm.

Phalanges

The skeletal components located in the digits of humans and other vertebrates.

Carpals

The eight small bones that make up the wrist that connect the hand to the forearm.

Metacarpals

The five long bones found in the hand between the wrist (carpals) and the fingers (phalanges), making up the palm.