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, a U.-based MNC that is considering obtaining funding for a project in Germany: risk-free rate = .

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Assume the following information for Cello Co., a U.S.-based MNC that is considering obtaining funding for a project in Germany:

U.S. risk-free rate = .04

German risk-free rate = .06

Risk premium on dollar-denominated debt provided by U.S. creditors = 0.03

Risk premium on euro-denominated debt provided by German creditors = .04

Beta of project = 1.2

Expected U.S. market return = .10

U.S. corporate tax rate = 0.29

German corporate tax rate = .40

 

What is Cello's cost of dollar-denominated debt? 0.0497

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