Question
An Italian multinational company has the following information. Italian risk-free cost of debt in euros () 4% Cost of debt in euros () 3% Corporate
- An Italian multinational company has the following information.
| Italian risk-free cost of debt in euros () | 4% |
| Cost of debt in euros () | 3% |
| Corporate tax rate | 35% |
| Beta | 0.80 |
| Italian equity market risk premium | 5% |
| Shares outstanding | 94,500,000 |
| Share price in euros | 24 |
| Debt outstanding in euros | 255,000,000 |
- Calculate the companys after-tax cost of debt.
(1.5 marks)
- cost of equity
(1.5 marks)
- WACC; from domestic perspective
(3.5 marks)
- If the global beta is estimated to be 0.60, and the expected return from the global portfolio is 4.5%, compute the companys WACC, from the global perspective (3.5 marks)
- Explain how a letter of credit (L/C) (i) facilitates international trade, (ii) the principle parties involved and (iii) the principle advantage. (5 marks)
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Personal Finance For Canadians
Authors: Elliot Currie, Thomas Chambers, Kathleen Brown
9th Edition
0132286750, 978-0132286756
