Mature equity risk premium (US equity risk premium ) = 4.5%

US rf rate: 0.90%

US annualized std dev of equity market returns 22.92%

Dominican Republic annualized std dev of equity market returns 42.5%

Dominican Republics std dev of bond market returns 28%

Dominican Republics Country Risk premium: 4.2%

Dominican Republic Default Spread (BB-): 4.22% %

Revenue Company ABC derives from the Dominican Republic 50%

Exports contribution to the Dominican Republics GDP 15% Beta= 1.1

1. Use the equity market relative equity volatility approach to find the ERP and CRP for company ABC.

2. Use the default spread scaled for equity risk with Dominican Republic Government bonds approach to find the ERP and CRP for company ABC.

3. Use the rating based default spread approach to find the ERP and CRP for company ABC. Incorporating country risk in Ke (cost of equity):

4. Country risk (or equal CER exposure approach): find Ke for company ABC, using the country risk approach.(use CRP obtained in #3)

5. Country risk approach using Beta as a measure of exposure: find Ke for company ABC, using the country risk approach and Beta as measure of exposure.(use CRP obtained in #3)

6. .Relative measure (lamda) approach: find Ke for company ABC, using the relative measure (lamda) approach. .(use CRP obtained in #3)