Use the following information for Firm A, a German.-based corporation that needs funding for a project in the U.S. to answer the question below.

 U.S. risk-free rate = 4%

German risk-free rate = 5%

Risk premium on dollar-denominated debt provided by U.S. creditors = 3%

Risk premium on euro-denominated debt provided by German creditors = 4%

Beta of project = 1.5

Expected U.S. market return = 10%

Expected German market return = 15%

Spot rate = $1.10/€

Forward rate = $1.09/€

U.S. corporate tax rate = 30%

German corporate tax rate = 40%

 

What is Pexi's cost of dollar-denominated equity?  (Please show your work)

Answer rating: 100% (QA)

To calculate Firm As cost of dollardenominated equity Ke you ... View the full answer