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You work for a U.S. firm, and your boss has asked you to estimate the cost of capital for countries using the euro. You know
You work for a U.S. firm, and your boss has asked you to estimate the cost of capital for countries using the euro. You know that S = $1.2107/ and F1 = $1.1507/. Suppose the dollar WACC for your company is known to be 8.5%. If these markets are internationally integrated, estimate the euro cost of capital for a project with free cash flows that are uncorrelated with spot exchange rates. Assume the firm pays the same tax rate no matter where the cash flows are earned.
A: The Euro cost of capital is __%
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