Assume the following information for a U.S.-based MNC that is considering obtaining funding for a project in France:
U.S. risk-free rate = 2%
France risk-free rate = 4.75%
Risk premium on dollar-denominated debt provided by U.S. creditors = 3%
Risk premium on euro-denominated debt provided by French creditors = 4%
Beta of the project with respect to the U.S. stock market = 1.2
Beta of the project with respect to the French stock market=2.5
Expected U.S. stock market return = 7%
Expected French stock market return=9%
U.S. corporate tax rate = 30%
French corporate tax rate = 40%
What is the cost of euro-denominated equity for this firm?
15%
8%
17.6%
15.38%