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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Definitions:

Major Structure

The most stable or dominant arrangement of atoms within a molecule out of all possible isomeric forms.

Chromic Acid

A powerful oxidizing agent made from mixing chromium trioxide or sodium dichromate with sulfuric acid, used in cleaning laboratory glassware and oxidizing organic compounds.

Oxidation

A chemical process involving the loss of electrons or an increase in oxidation state by a molecule, atom, or ion.

Chromium

A chemical element with symbol Cr and atomic number 24, known for its high corrosion resistance and hardness.