A negative effective financing rate for a U.S. firm implies that the firm:
A) will incur a loss on the project financed with the funds.
B) paid more interest on the funds than what it would have paid if it had borrowed dollars.
C) will be unable to repay the loan.
D) none of the above

Question

Quizplus · Accepted Answer

A negative effective financing rate means that the cost of borrowing funds is less than the return on investment. Therefore, the firm can make a profit from the project financed with the borrowed funds. It does not imply any of the options given.

A Negative Effective Financing Rate for a U