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:

Collective Output

This term refers to the total production or output produced by a group or collective entity, such as a country or industry.

Foreign Aid

Financial assistance provided by one country to another, typically for development projects, humanitarian aid, or economic stabilization.

Microcredit Programs

Financial services provided to low-income individuals or to those without access to typical banking services.

Repayment Rates

The percentage of borrowed principal that is paid back to lenders within a specified period of time.