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Question: Sambuka, Inc., can issue bonds either in U.S dollars or in Swiss francs. Dollar- denominated bonds would have a coupon rate of 15 percent; Swiss franc-denominated bonds would haev a coupon rate of 12 percent. Assuming that Sambuka can issue bonds worth $10 million in either currency, that the current exchange rate of the Swiss franc is $.70 and that the forecasted exchange rate of the franc in each of the next 3 years is $.75, what is the annual cost of financing for the franc-denominated bonds? Which type of bond should Sambuka issue? How do you find the initial cash flows?

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