Section C -Long Answer - Answer any ONE question 1 x 9 marks = 9 marks 0-8: Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. 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. It has approached two different investment banking advisors, Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange. WACC for Kashmiri (U.S.): Bank of New York Symbol Goldman Sachs B pjm 0.90 Assumptions Components of beta: Estimate of correlation between security and market Estimate of standard deviation of Tata's returns Estimate of standard deviation of market's return 0.85 24.0% 30.0% m 18.0% 22.0% krf 3.0% 3.0% kd 7.5% 7.8% Risk-free rate of interest Estimate of Tata's cost of debt in US market Estimate of market return, forward- looking Corporate tax rate Proportion of debt km T D/V 9.0% 35.0% 35% 12.0% 35.0% 40%