regber international is building an addition to one of its overseas manufacturing fa 4373568

Regber International is building an addition to one of its overseas manufacturing facilities with all construction costs being paid in foreign currency (FC) as follows: 200,000 FC, 300,000 FC, 400,000 FC, and 100,000 FC on March 1, June 30, August 31, and September 30, respectively. The initial payment was financed by a 2-month note in the amount of 200,000 FC. The note bears interest at the rate of 4.8% and principal and interest are to be paid on April 30. On April 30, the company secured a 6-month note in order to finance ongoing construction costs. This 300,000 FC note bears interest at 6% and calls for quarterly interest payments. On June 1, the company forecasted remaining construction payments and acquired a forward contract to buy 400,000 FC at a forward rate of $1.53 with settlement on August 31. Various spot and forward rates are as shown: Calculate the basis of the building addition including capitalized interest and financing costs associated with the forward contract. Assume that the construction was completed on September 30. View Solution:
Regber International is building an addition to one of its

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