Zeda, Inc., a U. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of…

3

5,000,000

200,000

The normal borrowing rate is 6 percent in dollars and 5.5 percent in Danish krone. The current spot rate is DKK5.60/$1.00 and the expected inflation rate is 3% in the U.S. and 2.5% in Denmark. What is the present value of the benefit of the concessionary loan?