Assume the Following Information for Pexi Co

question 47

Multiple Choice

Assume the following information for Pexi Co.,a U.S.-based MNC that is considering obtaining funding for a project in Germany:
U.S.risk-free rate = 4%
German risk-free rate = 5%
Risk premium on dollar-denominated debt provided by U.S.creditors = 3%
Risk premium on euro-denominated debt provided by German creditors = 4%
Beta of project = 1.2
Expected U.S.market return = 10%
U.S.corporate tax rate = 30%
German corporate tax rate = 40%
What is Pexi's cost of dollar-denominated debt

• A) 7.0%.
• B) 8.0%.
• C) 6.3%.
• D) 4.9%.

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Definitions:

Behavior Therapy

A type of psychotherapy that focuses on modifying negative behaviors and thought patterns.

Symptom Substitution

A hypothesis in some psychological schools of thought that a symptom will be replaced by another if the underlying cause of the symptom is not addressed.

Behavioral Activation

A therapy technique designed to help patients engage more in their lives through activities that are aligned with their values, to combat depression.

Avoidance Behaviors

Actions taken to prevent or evade experiencing uncomfortable or distressing thoughts, feelings, or situations.