Compute the domestic wacc

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The US MNC is also considering a project in the US. They will use the same debt/equity mix as in the Brazilian project. The 5-year Treasury rate is 0.66% (.0066) and the firm can borrow at 34 bps over Treasury. Their effective tax rate is 21%. The S&P 500 return they are using is 30.43% and the domestic beta is also 1.5.

a. Using the above data, compute the domestic WACC.

b. Internal analysis of the US project is projected to return an internal rate of return of 9%. Using the WACC computed in a, should the firm proceed with the project? Explain.

c. If they decide that their multi-market WACC is a 50% weight for each project, what would their new multi-market weighted WACC be?

Reference no: EM132500756

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