You can exchange €100 for $106.38 currently. The inflation rate in Euroland is expected to be 5.3% as compared to 3.67% in the U.S. Assuming that relative purchasing power parity exists, the exchange rate 3 years from now should be:

	a.	€0.8011/$1
	b.	€0.9703/$1
	c.	€0.9867/$1
	d.	€0.8128/$1

A company has a cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $1,000,000 and sells at 104% of face value. The tax rate is 21%. What is the company's weighted average cost of capital?

	a.	8.61%
	b.	8.82%
	c.	6.54%
	d.	6.19%

Answer rating: 100% (QA)

The detailed answer for the above question is provided below SOLUTION To calculate the expected exchange rate three years from now we can use the rela... View the full answer