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Ohio Inc. has a global beta of 1.7 and its debt-to-equity ratio is 0.4. The risk-free rate is 3.4% and the expected global market risk
Ohio Inc. has a global beta of 1.7 and its debt-to-equity ratio is 0.4. The risk-free rate is 3.4% and the expected global market risk premium is 8.5%. Although Ohio is a US firm, it issued Swiss Franc (SF) denominated bond and converted SF to US dollar. The semi-annual interest payment is made in SF. The coupon rate is 7%, the price of the bond is SF1020, the face value is SF1,000, and the bond matures in 20 years. The exchange rate is expected to move from SF0.9600/$ to SF0.9300/$. Ohio's tax rate is 40%. a. What's Ohio's SF cost of debt? b. What's your best estimate of Ohio's US dollar cost of debt? c. What's Ohio's cost of equity? d. What's Ohio's WACC
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