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Assume the following information for Pexi Co., a U.S.-based MNC that needs funding for a project in Germany: U.S. risk-free rate = 4% Cost of
Assume the following information for Pexi Co., a U.S.-based MNC that needs funding for a project in Germany:
U.S. risk-free rate = 4%
Cost of debt provided by U.S. creditors = 7%
Beta of project = 1.2
Expected U.S. market return = 10%
U.S. corporate tax rate = 30%
1) What is Pexi's cost of equity?
2) What is Pexi's cost of capital (WACC) assuming that Pexi uses 60% equity and 40% debt?
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