Fard Company is a US company that produces electric cars. The company sells its electric cars in both US market and UK market. Recently, the company set up a new production plant in UK and the CEO of the company is planning to finance this production plant investment. There are two alternatives available: alternative A: issue a 10 year US dollar debt, alternative B: issue a 10 year debt in British pounds. Assume that the current UK interest rate is 2.5% and US dollar interest rate is 5.5%. You are recently hired as a financial manager of the company and are asked to answer the following questions.
Besides financing the investment of manufacturing plant in UK, is there any other rationale for the use of British pounds debt? Illustrate your answer with example.
What alternative would you advise the company to take? Explain what major factors need to be considered. Illustrate your answer with example(s).