If an Australian Company Borrows Funds Offshore (For Use in Australia)at

question 6

Essay

If an Australian company borrows funds offshore (for use in Australia)at 3% p.a., rather than borrowing domestically at 6% p.a., and decides not to hedge their FX risk exposure, what will be their effective cost of funds? What will the effective interest cost if the risk is hedged with an FX swap?

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Definitions:

Levels of Rivalry

Levels of rivalry refer to the intensity and number of competitors in a market or industry, impacting the competitive dynamics and strategy decisions of firms.

Critical Inputs

Essential resources or components required for the production process.

Highly Differentiated

Products or services that are distinctly unique from competitors' offerings, often featuring unique attributes or benefits.

Supplier Power

The influence that vendors have over the market or their customers, often due to the scarcity of their product, lack of substitutes, or control of prices.