Find Grand Pet's WACC under each of the following scenarios.

a. Domestic financing: Grand Pet has a market value debt-to-equity ratio of 33 percent if funds are raised within the United Kingdom. Grand Pet's pretax borrowing cost on long-term debt in the United Kingdom is 6 percent. Grand Pet's beta relative to the FTSE 100 is 1.2. The risk-free rate in pounds sterling is 5 percent. The market risk premium over the risk-free rate within the U.K. is 5 percent. Interest is deductible in the U.K. at the marginal corporate income tax rate of 33 percent. What is Grand Pet's weighted average cost of capital within the U.K. market?

b. Global financing: International investors are willing to tolerate a 50 percent debt-to-equity mix for Grand Pet at the 6 percent cost of debt in pounds sterling. At this debt–equity mix, Grand Pet's equity beta is 1.1 relative to the MSCI world index. The market risk premium in pounds sterling is 5 percent and the risk-free rate is 5 percent. What is Grand Pet's weighted average cost of capital in international capital markets?

c. The valuation consequence: Grand Pet is expected to generate after-tax cash flow to debt and equity of £1 million in the coming year. This cash flow is expected to grow at percent in perpetuity. The valuation equation values Grand Pet's cash flow stream, given is the coming year's cash flow, i is the weighted average cost of capital, and g is the growth rate of annual cash flow. Find the value of Grand Pet using the weighted average costs of capital from the scenarios in parts

(a) and (b).