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Chrysler has decided to make a $ 100 million investment in Mexico via a debt-equity swap.

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4. Chrysler has decided to make a $ 100 million investment in Mexico via a debt-equity swap. Of that $ 100 million, $20 million will go to pay off high -interest peso loans in Mexico. The remaining $80 million will go for new capital investment. The government will pay 86 cents on the dollar for debt used to pay off peso loans and 92 cents on the dollar for debt used to finance new investment. If Chrysler can buy Mexican debt in the secondary market for 60 cents on the dollar, how much will it cost Chrysler to make its $ 100 million investment?

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ANSWER. Chrysler will need $20,000,000/. 86 in face value debt to buy enough pesos to pay off the $20 ...

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