What is the expected exchange rate in one year from now

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Reference no: EM131900660

The Capital Co, based in Germany has a WACC of 20%.

a) If its cost of debt is 12% and debt-equity ratio is 2, what is the firm cost of equity? Ignore taxes in your answer.

b) The company intends to expand into British market. The inflation rate in UK is projected at 6% p.a for the following years. The Euro inflation rate is projected to be 2% p.a. during that time. The exchange rate is currently £1= €1.2. Based on relative PPP, what is the expected exchange rate in one year from now?

Reference no: EM131900660

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