Page 56 - Demo

%u062c%u0645%u064a%u0639 %u0627%u0644%u062d%u0642%u0648%u0642 %u0645%u062d%u0641%u0648%u0638%u0629 %u0640 %u0627%u0625%u0644%u0639%u062a%u062f%u0627%u0621 %u0639%u0649%u0644 %u062d%u0642 %u0627%u0645%u0644%u0624%u0644%u0641 56 %u0628%u0627%u0644%u0646%u0633%u062e %u0623%u0648 %u0627%u0644%u0637%u0628%u0627%u0639%u0629 %u064a%u0639%u0631%u0636 %u0641%u0627%u0639%u0644%u0647 %u0644%u0644%u0645%u0633%u0627%u0626%u0644%u0629 %u0627%u0644%u0642%u0627%u0646%u0648%u0646%u064a%u0629Therefore, the optimal structure is the structure with the lowest cost, which is the second structure.Example 3:ABC, Inc. is an MNC located in the U.S. The U.S. T-bill rate is 8%, the Risk primum on dollar debt provided by U.S. creditors 8%, and the corporate tax in the U.S. is 35%. ABC%u2019s stock has a beta of 0.8, and the return on the Wilshire 5000 stock index is expected to be 15%. The Egypt T-bill rate =14%, Risk primum on dollar debt provided by Egypt creditors 5%, Corporate tax 45%. What is the weighted average cost of capital for 30% U.S. debt, 20% Egyptian debt, and 50% U.S. equity?Cost of equity:R = R + %uf062i f i(R %u2013 R )M f= 8% + 1.5 [15% - 8%] = 13.6%Cost of debt:= Risk-free return + Debt premium Cost of debt in the US = (8% + 8%) = 16% Cost of debt in Egypt = (14% + 5%) = 19%The weighted average cost of capital: WACC = weRe + wdRd (1-T)WACC =(50%*13.6%) + (30%*16%) (1-35%) + (20%*19%) (1-45%) = 12.01%Using the Cost of Capital to Evaluate International Projects21:Foreign projects may have different levels of risk than those of the international parent company, so the weighted average cost of capital (WACC) of the international parent company may not be the appropriate required rate of return for the foreign project. Therefore, there are different methods for calculating the risk differential between the international company and the project in the foreign country when preparing the capital budget for this foreign project.21 --Eun, C. S., & Resnick, B. G. (2012). International financial, edition Six, McGraw Hill.