Assignment Instructions

Using the below formula estimate the Cost of Equity for an acquisition in your chosen countries and currencies:

k_e = Cost of Equity= k_d+ (k_{US mkt} k_{US rf})+ (k_{ForeignSovDebt}k_{US rf})

where

k_d = k_{ForeignSovDebt}+2%

k_{US mkt} = Expected return on the S&P 500

k_{US rf} = Current yield on 10-year U.S. Treasuries

k_{ForeignSovDebt}= Current yield on 10-year sovereign debt for your chosen country.

Country #1: (Name)

Australia

k_{US mkt} =

Record data in the grayed section of the below table:

S&P 2018 Actual	S&P 2019 Actual	S&P 2020 Actual	S&P 2021 Actual	*S&P 2022 Forecasted
-4.4%	31.5%	18.4%	28.7%	-22.3%

Notes:

k_{US mkt} = The AVERAGE of S&P 2018, 2019, 2020, 2021 and *2022 forecast.

Example:

k_{US mkt} = (S&P 2018 + S&P 2019 + S&P 2020 + S&P 2021 + *S&P 2022 forecast) / 5.

K_d =

5.63%

k_{US mkt} =

10.38%

k_{US rf} =

3.82%

k_{ForeignSovDebt}=

3.63%

k_e =

12%

Assess whether the cost of equity calculated for Australia is a reasonable measure of the risk the country? Support assessment using data and or research-based information. Use APA in-text citation in your analysis comments and provide reference source in Section III below.