*FOR NEEL*

Please show your work for all three parts of question 7. I should be able to see exactly how you calculated your results.

Questions

1. What was the total cost of Nabisco? How will RJR pay for the last 49%?

2. What is the breakdown of how the first 51% has been financed? What portions are being refinanced? How much remains to be refinanced?

3. Why does RJR prefer to use debt rather than equity?

4. What are the concerns about issuing debt in the domestic market?

5. What advantages might RJR have if it issues debt in the Euromarket?

6. What is a Dual Currency Bond? Who might be interested in buying the one suggested for RJR and why?

7. What would be the all-in cost of financing (The IRR) for each of the following:

a. 5-year Eurodollar bond

b. 5-year Euroyen bond hedged into dollars (involves converting yen to dollars at the forward exchange rates found in Exhibit 8)

c. 5-year Dual Currency Bond hedged into dollars (involves converting yen to dollars at the forward exchange rates found in Exhibit 8)

8. What do you suggest that RJR do? Why?