a) The Copper Mountain company in Boulder, Colorado (US) borrows 2,000,000 for one year at 5.25% interest. The current exchange rate is 0.79 per US dollar. What is the cost (expressed in % terms) of this debt (from the dollar perspective) if the pound depreciated 5%? What is the cost (expressed in % terms) of this debt (from the dollar perspective) if the pound appreciates 5%?

b) This part of the problem is not related to part a) The Copper Mountain company is evaluating a purchase of Neft", a small oil company in Russia, and trying to estimate Nefts cost of equity. The Copper Mountain companys analysts collect the following information: risk free rate is 5%, sovereign spread (risk premium) for Russia is 7% Nefts beta is 1.5 equity market risk premium is 6.8% What is Nefts cost of equity?