Suppose the domestic cost of capital for a U.S.-based company is 10%. Also, the U.S. interest rate is 6% and the European interest rate is 7%. What is the foreign denominated cost of capital for the company?

Question

Quizplus · Accepted Answer

A) Foreign cost of capital = [(1 + foreign interest rate) / (1 + domestic interest rate)] × (1 + domestic WACC) - 1
Foreign cost of capital = [(1 + 0.07) / (1 + 0.06)] × (1 + 0.10) - 1 = 11.04%

Suppose the Domestic Cost of Capital for a U