Baht debt against dollar debt for a Thai plant, expected costs of 5.94 and 5.60 percent, settled by a 60-40 split: a finished GF581 Unit 9 international financing memo. Searches like "gf 581 unit 9 assignment example", "gf581 unit 9 sample" and "gf581 unit 9 example" land here.
What a finished GF581 Unit 9 international financing memo looks like
Three pages to the chief financial officer with a cost table, a scenario grid and a funding diagram. The table converts the baht loan into dollar terms: 3.40 percent interest compounded with the 2.46 percent annual baht appreciation implied by forward rates gives an expected cost of 5.94 percent, against 5.60 percent for dollars borrowed by the parent. A break-even line states that the baht loan is cheaper whenever the baht appreciates less than 2.13 percent a year. The grid shows three outcomes: 8.57 percent if the baht rises 5 percent annually, 3.40 if it holds, minus 1.77 if it falls 5 percent. A tax row notes that during the three exempt years a baht interest deduction saves nothing, THB 1.63 million a year forgone on the local tranche.
How a GF581 Unit 9 example is structured
Costs are compared first and then set aside, because under parity the expected costs of the two loans converge and the real difference is exposure. Expected cost, 5.94 against 5.60, opens with a caution: the gap is smaller than one forecast error. Tax follows, and it cuts against the local loan for three years: the plant owes no Thai corporate tax during its exemption, so baht interest shields nothing until year four, while the parent's dollar interest is deductible at home within applicable limits. The deciding section turns to matching. Sixty percent of the plant's revenue is baht sales to Thai utilities and industrial estates; the rest is dollar exports. Borrowing THB 240 million locally and lending 4.71 million dollars from the parent against export receipts leaves each currency of debt paid from the same currency of revenue. A closing line lists what would reverse the split.
Two quotes in one currency
The baht loan's 3.40 percent becomes 5.94 in dollar terms once the forward-implied appreciation of 2.46 percent is compounded in. The parent's 5.60 needs no conversion, so the table compares like with like.
The break-even appreciation
At 2.13 percent a year of baht strength the two loans cost the same. The memo treats that figure as the forecast question the treasurer is really answering, and says no parity estimate settles it.
An exemption that silences the shield
With no Thai tax owed in years one to three, interest of THB 8.16 million a year on the local tranche saves nothing. From year four the deduction is worth 20 percent, bringing the after-tax rate to 2.72.
Debt matched to revenue
Sixty percent baht borrowing against sixty percent baht sales; dollar funding from the parent against export receipts. The plant's own net exposure shrinks, and the parent's baht investment is partly offset by baht liabilities.
Triggers for revisiting the split
A larger export share, a local rate reset above 4 percent, or a change in withholding on intercompany interest. Every trigger carries the figure that would send the memo back to the chief financial officer.
Where marks go in GF581 Unit 9
Financing memos in GF581 lose most by comparing nominal rates across currencies, choosing the 3.40 percent loan because it looks cheaper than 5.60 without converting either into a common currency. Many sections deduct for an expected cost built on a hunch about the baht rather than on forward or parity figures, and for a comparison that omits the break-even rate. Tax treated as a flat rate on both sides misses the point rewarded here: a tax holiday or a loss position can make a deduction worthless in one country and valuable in the other. Memos that recommend on cost alone, without asking which revenue will service the debt, leave the exposure question unanswered. Recommendations that ignore withholding on intercompany interest or documentation of arm's-length terms draw smaller deductions.
Get a GF581 Unit 9 example written to your instructions
Local and parent borrowing rates, the subsidiary's revenue mix and any tax terms your Unit 9 case sets out are the inputs, along with the prompt and rubric. Back comes a memo that converts both options into one currency, finds the break-even and recommends a funding mix, delivered within 24-48h at no charge for the first.
GF581 Unit 9 questions, answered
How do I compare interest rates in two currencies?
Convert the foreign rate into home-currency terms by compounding it with the expected change in the exchange rate, then compare. Forward rates or interest rate parity give a defensible expected change. Because the result depends on that expectation, add a break-even: the rate of appreciation at which the two loans cost the same. That figure is often more useful to a reader than either cost alone.
Does borrowing locally reduce currency risk?
It reduces the mismatch when the subsidiary earns in the local currency, since debt service and revenue then move together. It can also offset part of the parent's translation exposure, because local liabilities shrink in dollar terms when local assets do. It does not help a subsidiary that exports in dollars; for that one, dollar debt may be the better match.
Should tax holidays affect the financing choice?
Yes, and assignments often reward noticing it. An interest deduction is worth the tax rate it saves, so in years when the subsidiary pays no local tax the deduction is worth nothing there. Borrowing where the deduction has value, subject to that country's limits and transfer pricing rules, can lower the group's after-tax cost even when the pre-tax rate is higher.