Apple Inc., a U.S. based corporation, wants to purchase Technology Inc. a company based in Singapore. The current U.S. Treasury bond rate (Rus) is 4%. The expected inflation rate in the United States is 3% and 4% in Singapore. Apple Incs pretax cost of debt is 8% and the current interest rate on AA-rated U.S. corporate bonds is 10%. Based on targets interest coverage ratio, its credit rating is estimated to be AA. The countrys risk premium (CRP) provided by Standard & Poors is estimated to be 1%. The firms size premium is estimated at 2.0%. The marginal tax rate is 25%. Technology Inc. has 30 million shares outstanding priced at $10 per share. Technology Inc. also has 20,000 bonds outstanding priced at $1000 per bond. The targets beta and the country beta are estimated to be 1.25 and 0.9, respectively. The equity premium is estimated to be 7% based on the spread between the prospective return on the countrys equity index and the estimated risk-free rate of return.

1. Develop the appropriate weighted average cost of capital Apple Inc. should use to discount the targets projected annual cash flows expressed in U.S. dollars.