Foods Unlimited is the largest and most successful specialty goods company based in Bush Bush, Jamaica It has not entered the North American marketplace yet but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary The foll...

a The prospective cost of debt for Bush would be the cost of debt in the US market multiplied by 1ta ...

Foods Unlimited is the largest and most successful specialty goods company based in Bush Bush, Jamaica. It

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Foods Unlimited is the largest and most successful specialty goods company based in Bush Bush, Jamaica. It has not entered the North American marketplace yet but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. The following information was given
Beta 1.20; risk free rate 3%; estimate of cost of debt in US market 7.5%, estimate of market return- forward looking 9%, corporate tax rate 35% and proportion of equity 65%
Use the information to calculate the
Prospective costs of debt (after-tax), equity, and the WACC for Bush. 9 marks
Assume the company wants to borrow US$250,000 for this expansion. The current spot rate is JMD$130/$ with expected rate of JMD$147/$ in one year. What would be the one-year effective cost of debt for the firm if it borrows the funds? 2 marks
Identify and explain at least four major factors that may affect Bush Bush's decision to take the loan and enter the North American market. 4 marks