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    9. A U.S. company needs to borrow $100 million for a period of seven years. It can issue dollar debt at 7 percent or yen debt at 3 percent.

    a. Suppose the company is a multinational firm with sales in the United States and inputs purchased in Japan. How should this affect its financing choice?

    b. Suppose the company is a multinational firm with sales in Japan and inputs that are primarily determined in dollars. How should this affect its financing choice?

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    Solution Preview

    a. Suppose the company is a multinational firm with sales in the United States and inputs purchased in Japan. How should this affect its financing choice?

    ANSWER. According to the international Fisher effect, the difference in interest rates reflects expected appreciation in the value of the yen. That is, yen are not automatically less expensive to borrow just because the interest rate on yen is ...

    Solution Summary

    This solution provides a detailed analysis of the given financing questions regarding a company that needs to borrow $100 million dollars and has a choice of issuing dollar debt or Yen debt.

    $2.19

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