Assume the following information for a U.S.-based MNC that is considering obtain

Question

Assume the following information for a U.S.-based MNC that is considering obtaining funding for a project in France: U.S. risk-free rate = 2% France risk-free rate = 5% Risk premium on dollar-denominated debt provided by U.S. creditors = 3% Risk premium on euro-denominated debt provided by French creditors = 4% Beta of the project with respect to the U.S. stock market = 1.2 Beta of the project with respect to the French stock market=2.5 Expected U.S. stock market return = 7% Expected French stock market return=9% U.S. corporate tax rate = 30% French corporate tax rate = 40% What is the weighted average cost of capital if the capital structure consists of 55% French debt and 45% U.S. equity ?

Choices :

6.57%

10.4%

6.83%

8.67%

Explanation / Answer

6.83%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.