Question

Sunrise​ Manufacturing, Inc. Sunrise​ Manufacturing, Inc., a U.S. multinational​ company, has the following debt components in its consolidated capital​ section, ​Sunrise's shareholders' equity is $50,000,000 and its finance staff estimates their cost of equity to be 17.5​%.

Current exchange rates are also listed in the table. Income taxes are 39​% around the world after allowing for credits. Calculate​ Sunrise's weighted average cost of capital. Are any assumptions implicit in your​ calculation?

What is​ Sunrise's weighted average cost of​ capital?

Data Table:

Assumption	Value
Tax rate	39​%
​25-year US$ bonds	​$20 comma 000 comma 00020,000,000
​5-year US$ bonds	​$8,000,000
​10-year eurobonds​ (euros)	euro€8,000,000
​20-year yen bonds​ (yen)	¥750,000,000
​Before-tax cost of​ 25-year US$ bonds	8.0​%
​Before-tax cost of​ 5-year US$ bonds	5.0​%
​Before-tax cost of​ 10-year eurobonds	6.0​%
​Before-tax cost of​ 20-year yen bonds	4.0​%
Spot rate ​($/euro€​)	1.2200
Spot rate ​($/pound£​)	1.9400
Spot rate ​(yen¥​/$)	105.00

Answer 1

Weighted Average Cost of Capital (WACC)= 11.3272% as follows: