Mm co. predicts sales of $30,000 for may. mm co. pays a sales manager a monthly salary of $3,000 plus a commission of 6% of sales dollars. mm’s production manager recently found a way to reduce the amount of packaging mm uses. as a result, mm’s product will receive better placement on store shelves and thus may sales are predicted to increase by 8%. in addition, mm’s shipping costs are predicted to decrease from 4% of sales to 3% of sales.

The east asiatic company (eac), a danish company with subsidiaries throughout asia, has been funding its bangkok subsidiary primarily with u.s. dollar debt because of the cost and availability of dollar capital as opposed to thai baht-denominated (b) debt. the treasurer of eac-thailand is considering a 1-year bank loan for $247,000.the current spot rate is b32.03 /$, and the dollar-based interest is 6.78% for the 1-year period. 1-year loans are 12.04% in baht.a. assuming expected inflation rates of 4.3 % and 1.24% in thailand and the united states, respectively, for the coming year, according to purchase power parity, what would the effective cost of funds be in thai baht terms? b. if eac's foreign exchange advisers believe strongly that the thai government wants to push the value of the baht down against the dollar by5% over the coming year (to promote its export competitiveness in dollar markets), what might the effective cost of funds end up being in baht terms? c. if eac could borrow thai baht at 13% per annum, would this be cheaper than either part (a) or part (b) above?