Question
Sunrise Manufacturing, Inc., a U.S. multinational company, has the following debt components in its consolidated capital section, Assumption Value Tax rate 39% 25-year US$ bonds
Sunrise Manufacturing, Inc., a U.S. multinational company, has the following debt components in its consolidated capital section,
Assumption | Value |
|
Tax rate | 39% | |
25-year US$ bonds | $20,000,000 | |
5-year US$ bonds | $5,000,000 | |
10-year eurobonds (euros) | 9,000,000 | |
20-year yen bonds (yen) | 950,000,000 | |
Pre-tax cost of 25-year US$ bonds | 6.5% | |
Pre-tax cost of 5-year US$ bonds | 4.5% | |
Pre-tax cost of 10-year eurobonds | 6.0% | |
Pre-tax cost of 20-year yen bonds | 3.0% | |
Spot rate ($/) | 1.2500 | |
Spot rate ($/) | 1.8800 | |
Spot rate (/$) | 109.00 | |
|
. Sunrise's shareholders' equity is $45,000,000 and its finance staff estimates their cost of equity to be 17.5%. Current exchange rates are also listed in the table. Income taxes are 39% around the world after allowing for credits. Calculate Sunrise's weighted average cost of capital. Are any assumptions implicit in your calculation?
What is Sunrise's weighted average cost of capital?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started