Kashmiri's Cost of Capital. Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. It has not yet entered the North American ma considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment ba Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U Using the assumptions by the two different advisors in the popup window,, calculate the prospective costs of debt, equity, and the WACC for Kashmiri (U.S.). What is the after-tax cost of debt estimated by Goldman Sachs for Kashmiri? 6.24 % (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.)

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter16: Country Risk Analysis
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Kashmiri's Cost of Capital. Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. It has not yet entered the North American marketplace, but is
considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment banking advisors,
Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange.
Using the assumptions by the two different advisors in the popup window, E, calculate the prospective costs of debt, equity, and the WACC for Kashmiri (U.S.).
What is the after-tax cost of debt estimated by Goldman Sachs for Kashmiri?
6.24% (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Assumptions
Symbol
Goldman
Sachs
Bank of
New York
0.86
0.36
Estimate of correlation
Pjm
between security and market
23.5%
29.8%
Estimate of standard
༠
deviation of Kashmiri's returns
Estimate of standard
бт
18.1%
21.2%
deviation of market's return
Risk-free rate of
кут
4.0%
4.0%
interest
Estimate of Kashmiri's
Kd
7.3%
7.5%
cost of debt in U.S. market
Estimate of market
km
9.4%
11.9%
return, forward-looking
Corporate tax rate
t
35%
35%
Proportion of debt
DIV
25%
20%
Proportion of equity
E/V
75%
80%
-
☑
Transcribed Image Text:Kashmiri's Cost of Capital. Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. It has not yet entered the North American marketplace, but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment banking advisors, Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange. Using the assumptions by the two different advisors in the popup window, E, calculate the prospective costs of debt, equity, and the WACC for Kashmiri (U.S.). What is the after-tax cost of debt estimated by Goldman Sachs for Kashmiri? 6.24% (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Assumptions Symbol Goldman Sachs Bank of New York 0.86 0.36 Estimate of correlation Pjm between security and market 23.5% 29.8% Estimate of standard ༠ deviation of Kashmiri's returns Estimate of standard бт 18.1% 21.2% deviation of market's return Risk-free rate of кут 4.0% 4.0% interest Estimate of Kashmiri's Kd 7.3% 7.5% cost of debt in U.S. market Estimate of market km 9.4% 11.9% return, forward-looking Corporate tax rate t 35% 35% Proportion of debt DIV 25% 20% Proportion of equity E/V 75% 80% - ☑
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