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. Zegala Inc. is an all-equity funded company that operates in two businesses and derives all of its revenues in the United States. Estimated Value
. Zegala Inc. is an all-equity funded company that operates in two businesses and derives all of its revenues in the United States.
Estimated Value (in $ millions) | Unlevered Beta | |
---|---|---|
Hotels | $500.00 | 0.90 |
Travel Services | $1,000.00 | 1.20 |
Conpany | $1,500.00 | 1.10 |
The firm is considering borrowing $1.5 billion and expanding its hotel business into Mexico. The US 10-year T.bond rate is 3%, the Mexican government 10-year peso rate is 8%k the equity risk premium for the US is 5% and the equity risk premium for Mexico is 7.5%. Estimate the cost of equity in US $ terms for the company, after the expansion. (The marginal tax rate is 25%)
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