$($Please answer all and explain the reason behind numerical answers$)$ Deaton Inc., a U$.$S$.$ based retailer, is considering an investment project in Nigeria. The risk of the project is similar to that of Deaton$$s other investments. Deaton$$s target capital structure is $70\%$ equity and $30\%$ debt. The current interest rate in Nigeria is $21\%.$ The interest rate on Deaton$$s current debt is $15\%.$ Deaton is in the $30\%$ corporate income tax bracket. The risk free return in the United States is $2\%.$ The return to the market in the U$.$S$.$ is $9\%$ and the Deaton$$s Beta is $0\mathrm{.}8$ Deaton could borrow in Nigeria at $21\%$ and the risk free rate in Nigeria is $14\%.$

a$.$ If Deaton finances the Nigerian project using parent funds, find the cost of capital.

b$.$ Once the project is established, Deaton will have significant sales in Nigerian nairu. Deaton is concerned that the nairu may depreciate significantly over the next few years so it is considering having the subsidiary borrow in Nigeria. Deaton$$s treasurer recently finished his MBA in international business at Faber College. He recommends that Deaton issue stock in Nigeria so it could avoid the high interest rate it would incur if it borrowed in Nigeria. What do you think of his MBA?