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FIN- Humongous International Inc. is headquartered in the UK

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Question;Humongous International Inc. is headquartered in the UK but conducts metal oremining in resource-rich countries for export to worldwide markets, primarily the US andChina. It is evaluating where to locate a new mining operation that would have thelowest costs. South Africa is among the countries it is considering for the new mine andyou have been requested to determine an appropriate cost of capital for the analysis.Since many metals are priced in USD, you have been asked to prepare your estimatesfrom a US-centric perspective. Please estimate the cost of equity capital based on thedata below for the following methods:Identical global cost of capitalWorld CAPMSegmented/Integrated CAPMGoldman-IntegratedDamodaran.CHINARisk free interestrateExpected MarketReturnEquity RiskPremiumBetaEquity marketcapitalization toGDPVolatility ofcountry equitymarket/Volatilityof country bondsUKUS6.00SOUTHAFRICA5.5World.50.2511.9012.906.105.256.325.907.405.605.006.072.5045%2.15212%2.00118%2.15125%1.90100%1.501.701.201.201.20

 

Paper#49940 | Written in 18-Jul-2015

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