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McDougan Associates (USA).McDougan Associates, a U.S.-based investment partnership, borrows 70,000,000 at a time when the...

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Finance

McDougan Associates (USA).McDougan Associates, a U.S.-based investment partnership, borrows 70,000,000 at a time when the exchange rate is $1.3326/. The entire principal is to be repaid in three years, and interest is 6.150% per annum, paid annually in euros. The euro is expected to depreciate vis--vis the dollar at 3.3% per annum. What is the effective cost of this loan for McDougan?

Complete the following table to calculate the dollar cost of the euro-denominated debt for years 0 through 3. Enter a positive number for a cash inflow and negative for a cash outflow.(Round the amount to the nearest whole number and the exchange rate to four decimal places.)

Year 0

Year 1

Year 2

Year 3

Proceeds from borrowing euros

70,000,000

Interest payment due in euros

Repayment of principal in year 3

(70,000,000)

Total cash flow of euro-denominated debt

Expected exchange rate, $/

1.3326

Dollar equivalent of euro-denominated cash flow

$

$

$

$

What is the effective cost of this loan for McDougan?

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