Question
Q)-The CFO of a company estimates that the risk-free rate is 2.5%, and the company's credit risk premium is 5.5%. The domestic beta is 1.55.
Q)-The CFO of a company estimates that the risk-free rate is 2.5%, and the company's credit risk premium is 5.5%. The domestic beta is 1.55. The international beta is 1.58. The company's capital structure comprises 47% debt and 53% equity. The expected rate of return on a well-diversified market portfolio held by the domestic investor is 14%. The expected market return for a larger globally integrated equity market is 10%. The corporate income tax rate is 25%. For both the domestic CAPM and international CAPM (ICAPM), calculate the company's weighted average cost of capital.
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