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You have been given the task of estimating the cost of capizal for Valdez Inc., a Colombia - based company that operates in two businesses
You have been given the task of estimating the cost of capizal for Valdez Inc., a Colombiabased company that operates in two businesses food processing and grocery retail and in two countries the United States and Colombia. The estimated values of the businesses is broken down in the table below with the values in millions of US dollars:
tableColombia,USA,tableUnlevered Beta forbusinessFood processing value of businessGroceries value of businessGovernment bond rate in US $Government bond rate in PesosNAMarginal tax rate,
The company has $ million in debt, all in its US operations, with a synthetic rating of BBB and a company default spread of
a What is the value of the firm?
b Estimate the unlevered beta.
c Estimate the levered beta that you would use for Valdez Inc.
d Calculate the Colombian default spread.
e Calculate the risk free in USA.
f Estimate the cost of equity in US dollars.
g Estimate the aftertax cost of debt in US dollars.
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