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Question: REQUIREMENT 1 Shahizee Bhd is considering acquiring Shazimie Bhd either for cash or stock purchase. Information before the merger...
What is the before-tax ringgit cost of € loan?
Based on the after-tax ringgit cost, suggest in which currency would the company borrow?
At what exchange rate would the company be indifferent between borrowing in Malaysia or Germany?
REQUIREMENT 3
Sunny Corporation, is a Malaysian affiliate that has its operations in Jakarta, Indonesia. The firm is contemplating either to borrow in Malaysia at 16 percent per annum or in Jakarta at 12 percent per annum. The Ringgit is expected to depreciate from RM0.0320 / Rph100 at the beginning of the year to RM0.0360 / Rph100 at the end of the year. The corporate tax rate on the earnings of Jentayu's Indonesian affiliate is 36 percent.
What is the expected before tax Ringgit cost of the Rupiah loan?
What is the expected after tax Ringgit cost of the Rupiah loan?
What is the expected after tax Ringgit cost of the Ringgit loan?
Based on the above costs, in which currency should the firm borrow?
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