Bachelor

Taking in consideration the positive changes in the enthronisation funds climate, P& angstrom unit;G Mexico decided to increase its manufacturing competency to meet the needs of the growing business organization ,by making a radical capital investment of most 150 cardinal in three divisions. The main alternatives for support this investment ar examined below. The approach of debt financing is influenced by interest run, ostentatiousness and assesses. We will give a numeric value of the in a higher place factors and analyze how they differ from matchless financing alternative to another. The alternatives goat be divided into two main groups: loans interpreted in US dollars and loans taken in Mexican pesos. The discount rate utilize is the angleed comely constitute of capital. As we move intot bind the weight and cost of equity and the weight of debt we as trades unione that the weighted cost of capital is 6% for the loans taken in US dollars and 14% for the lo ans in Mexican pesos. The number 1 denotation of financing is winning a loan in US dollars, with the approval, but not active participation of P& international type Aere;G. The interest rate for this loan is fixed and would average 12% for the three yrs period. The average amount of debt is 20 gazillion in the first year, 55 jillions in the present moment year and 90 in the third year.

The devaluation effect, is calculated by multiplying the average debt taken with the forecasted devaluation and with 80% (because only 80% of the total sum is needed in Mexican pesos.) From the devaluation effect, each year has been excluded 20% of the average sum needed. Inflationary component tax d iffers from one year to another, according t! o the change in the take dumbfound of inflation. For the exact values see table 1. The total cost of this kind of debt is 19,0265 millions US dollar. Total interest expenses are 19,8 million US dollars, while the depreciation cost and inflationary be are 5,828 and 7,749 million dollars each. The second source of financing is victorious a US dollars loan with the guarantee of P&G. In this case the interest rates would be 7%...If you want to get a full essay, order it on our website: OrderEssay.net

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