Krystal Inc. is a consumer products company with operations in three countries, India, China and the US.

Revenues (in millions of US$) Government Bond rate inlocal currency Default Spreadof Government Bond Equity Market Standard deviation

Std deviation in Government Bond

India $500

7.00%

2.00%

20.00%

16.00%

China $1500 4.00% 1.00%

18.00%

12.00%

US $2000 2.50% 0.00%

15.00%

10.00%

The beta for the company is 1.20 and the equity risk premium for a mature market (like the US) is 5.5%. You can also assume that the local currency and foreign currency ratings are the same for each country.

a. Estimate the Indian Rupee cost of equity that Krystal should use for its Indian

operations. (1 point)

b. Estimate the US dollar cost of equity for the entire firm.