Recall Blades Inc. that is a famous producer of Speedos and has tentatively decided to establish a subsidiary in Thailand to manufacture roller blades. The new plant will be operated for 10 years and expected to be sold after that. Furthermore, forecasts for the future value of the THB indicate that the currency may continue to depreciate in the future.

At a recent meeting of the board of directors, the CFO of the company Mr. Holt presented his capital budgeting analysis. The CFO demonstrated the establishment of a subsidiary in Thailand had a net present value (NPV) of about $8 million with a 25 percent required rate of return.

Blades' board of directors, while favorable to the idea of international expansion, remained skeptical and had some questions about the changes that Thailand will face after it establishes a subsidiary in Thailand. They want to know the possible changes that might occur in the investors' required rate of return, cost of capital, systematic risk, cost of debt and equity, and capital structure of the company after Blades inc establishes a subsidiary in Thailand.

Therefore, Mr. Holt, the CFO of Blades Inc. has asked the financial analyst for the company to write a paper that studies thoroughly the concerns of the board of directors. Your paper should include the thorough analysis of the CAPM model, the mathematical formulation for the concepts you explain, and the numerical calculation by using the information given to you in the assignment and by using the internet.

Data for Calculation of WACCthat you could incorporate in your paper provided in the following table 3:

Table 3

Hypothetical Data Information for calculation of WACC