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Ch13_SSol

# Ch13_SSol - Problem 13.1 Winslow Manufacturing Inc Winslow...

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Problem 13.1 Winslow Manufacturing, Inc. Assumption Value Tax rate 30.00% 10-year euro bonds (euros) € 6,000,000 20-year yen bonds (yen) 750,000,000 Spot rate (\$/euro) 1.2400 Spot rate (\$/pound) 1.8600 Spot rate (yen/\$) 109.00 Weighted US Dollar Pre-tax Post-tax Component Component Amount Proportion Cost (%) Cost (%) Cost (%) 25 year US dollar bonds \$10,000,000 12.77% 6.000% 4.200% 0.5363% 5 year US dollar euronotes 4,000,000 5.11% 4.000% 2.800% 0.1430% 10 year euro bonds 7,440,000 9.50% 5.000% 3.500% 0.3325% 20 year yen bonds 6,880,734 8.79% 2.000% 1.400% 0.1230% Shareholders' equity 50,000,000 63.84% 20.000% 20.000% 12.7680% Total \$78,320,734 100.00% WACC = 13.9027% Winslow Manufacturing, Inc, a U.S. multinational company, has the following debt components in its consolidated capital section. Winslow's finance staff estimates their cost of equity to be 20%. Current exchange rates are also listed below. Income taxes are 30% around the world after allowing for credits. Calculate Winslow’s weighted average cost of capital. Are any assumptions implicit in your calculation? The component coupon costs (for example the 6% coupon on the 25-year US dollar bonds) are the same as the current yields to maturity that would be needed to sell similar bonds in the marketplace today. Current yields to maturity is the proper rate to use. The interest costs used for the euro and

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Ch13_SSol - Problem 13.1 Winslow Manufacturing Inc Winslow...

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