Savoy Inc. is a company based in Indonesia, with substantial interests in the

hotel$/$tourism business and in forest products.

Savoy also has a debt to equity ratio of $150\%.$ Indonesia has a rating of B$-,$ the

default spread for B$-$ rated bonds is $3\%,$ and the Indonesian equity index is three

times more volatile than the Indonesian long term bond. Estimate the cost of equity

for this firm in U$.$S$.$ dollar terms, if the treasury bond rate is $5\%.($The tax rate for the

firm is $30\%,$ and the historical risk premium in the US is $6\%.$