Question: Suppose now that Telmex has made its shares tradable internationally via cross listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of

Suppose now that Telmex has made its shares tradable internationally via cross listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Discuss the possible effects of international pricing of Telmex shares on the share prices and the firm's investment decisions.

The above table provides the correlations among Telemx, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is5%.

Correlation Coefficients SD (%) 18 15 10 R1%) Telmex Mexico World Telmex 1.00 Mexico 90 1.00 Worid 0.60 0.75 1.00 14 12

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