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boland boland
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8 years ago
Wallet Drug Company has just recently raised money abroad for the first time in the history of the firm. Prior to the recent equity issue abroad, the firm had a D/V ratio of 40%, an effective tax rate of 30%, a before-tax cost of debt of 9%, and a domestic beta of 1.3. The expected return on the market portfolio was 13% and the risk-free rate was 5%. After the equity issue, Wallet Drug has a D/V ratio of 50%, their after-tax cost of debt has not changed, nor has the effective tax rate, the firm's international beta is 1.0, the expected return on the market portfolio is only 12%, and the risk-free rate is still 5%. What is the change in the firm's WACC after the international equity issue?
A) 0.63%
B) 2.61%
C) 1.74%
D) There is no change in the firm's WACC.
Textbook 
Fundamentals of Multinational Finance

Fundamentals of Multinational Finance


Edition: 5th
Authors:
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noxx53noxx53
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boland Author
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8 years ago
Upwards Arrow Perfection
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8 years ago
We should all be helping each other on here, so I'm happy to have helped
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4 years ago
Thank you
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Thank you
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