Question: please show formula and step by step solution. thanks 12. A French firm has 500 million worth of debt denominated in Euros. The yield to

please show formula and step by step solution. thanks
 please show formula and step by step solution. thanks 12. A
French firm has 500 million worth of debt denominated in Euros. The

12. A French firm has 500 million worth of debt denominated in Euros. The yield to maturity on the debt is 6% and the corporate tax rate is 40%. The firm also has $500 million of USD denominated debt, with a YTM of 5% and a corporate tax rate of 25%, what is the combined after-tax cost of debt if the exchange rate is 1.13 USD/EUR? 1.91% a. b. 2.58% . 3.67% d. 4.12% e. None of the above 13. A US firm has $1 billion in equity by market value. The also has E 1 billion of equity in a British subsidiary. The cost of equity in the British subsidiary is 10.6%. If the exchange rate is 1.26 USD/GBP, what is the combined cost of equity? 8.80% a. b. 9.48% 10.17% 11.23% None of the above c. d. e. 14. A US corporation has a Brazilian subsidiary with retained earnings. The Brazilian subsidiary has a similar risk to the parent corporation, and its stock is not publicly traded. The parent firms cost of equity is 9%. The inflation rate in the US is 2.5%, while the inflation rate in Brazil is expected to be 7% Assuming ife and relative PPP holds, what should the cost of equity of the Brazilian subsidiary be? a. 11.5% b. 16.0% . 14.5% d. 13.5% e. None of the above 15. A US corporation has a subsidiary in India with retained earnings. The Indian subsidiary has no traded stock, but has similar business risks to the US parent. The parent firm's cost of equity is 12%. The 10 year US government bond rate is 3.14%. The ten year Indian government bond yield is 7.33%, using the sovereign bond approach, what should the cost of equity of the Indian subsidiary be? a. 16.19% b. 15.14% c. 10.47% d. 7.33% e. None of the above

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!