Assignment:
Ford can borrow dollars at 12% or pesos at 80% for one year. The peso:dollar exchange rate is expected to move from $1 = Ps 3300 currently to $1 = Ps 4500 by year’s end.
a. What is the expected after-tax dollar cost of borrowing dollars for one year if the Mexican corporate tax rate is 53%?
b. What is Ford’s expected after-tax dollar cost of borrowing pesos for one year?
c. At what end-of-year exchange rate will the after-tax peso cost of borrowing dollars equal the after-tax peso cost of borrowing pesos?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.