What is the cost of equity for the project

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A company based in the U.S is evaluating a project in Mexico. The U.S. risk-free rate of return is 4% and equity risk premium is 6%. The project has a beta of 1.5. The yield on 10-year Mexican government bonds denominated in U.S. dollars is 13% and the comparable 10-year U.S. Treasury bond yield is 8%. The annualized standard deviation of the Mexican stock index is 36% and the annualized standard deviation of the U.S. dollar denominated Mexican government bond market is 20%. What is the country risk premium for Mexico and what is the cost of equity for the project?

Reference no: EM13305683

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