The ABC Company,a U

question 27

Multiple Choice

The ABC Company,a U.S.based MNC,plans to establish a subsidiary in Ecuador to manufacture and sell water pumps.ABC has total assets of $80 million,of which $60 million is equity financed.The remainder is financed with debt.ABC considers its current capital structure optimal.The construction cost of the facility in Ecuador is estimated to be ECS 8,500 million,of which ECS 6,500 million is to be financed at a below-market rate of interest arranged by the Ecuador's government.The proposed project will increase the borrowing capacity by:

• A) ECS 1,215 million
• B) ECS 2,215 million
• C) ECS 3,215 million
• D) ECS 4,215 million

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Definitions:

Journal Entry

A record of a financial transaction in the accounting books.

Trial Balance

A bookkeeping worksheet where the balances of all ledgers are compiled into debit and credit account columns to check the accuracy of the financial transactions recorded.

Reference Column

A column in a table or spreadsheet used to hold information or data that aids in categorization or identification.

General Journal

A ledger in which all transactions are initially recorded, dated, and described.