Use the Information for the Question(s)below

question 38

Essay

Use the information for the question(s)below.
Luther Industries,a U.S.Corporation,is considering a new project located in Great Britain.The expected free cash flows from the project are detailed below: You know that the spot exchange rate is S = 1.8862/£.In addition,the risk-free interest rate on dollars and pounds is 5.4% and 4.6% respectively.Assume that these markets are internationally integrated and the uncertainty in the free cash flow is not correlated with uncertainty in the exchange rate.You have determined that the dollar WACC for these cash flows is 10.2%.
-Calculate the pound denominated cost of capital for Luther's project.

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Social Contract

An implicit agreement among the members of a society to cooperate for social benefits, such as sacrificing some individual freedom for state protection.

Universal Ethical Principles

The fundamental guidelines that apply to people across all cultures, societies, and situations, emphasizing moral behaviors and actions.

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