Sunrise Manufacturing, Inc., a U.S. multinational company, has the following debt components in its consolidated capital section.

Question:

Sunrise Manufacturing, Inc., a U.S. multinational company, has the following debt components in its consolidated capital section. Sunrise's finance staff estimates their cost of equity to be 20%. Current exchange rates are listed below. Income taxes are 30% around the world after allowing for credits. Calculate Sunrise's weighted average cost of capital. Are any assumptions implicit in your calculation?

Assumption________________________Value

Tax rate.......................................30.00%

10-year euro bonds (€)...................6,000,000

20-year yen bonds (¥).................750,000,000

Spot rate ($/€).................................1.2400

Spot rate ($/£).................................1.8600

Spot rate (¥/$).................................109.00

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...