Singa Group is a Singaporean multinational companies. Below are the pertaining informations of the company....
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Accounting
Singa Group is a Singaporean multinational companies. Below are the pertaining informations of the company.
Estimated return of the Singaporean market portfolio
15%
Singapore 10-Year Government Bond
3%
Singa Groups beta
1.35%
Cost of debt before tax
6%
Singapores Corporate Tax
17%
Optimal Capital Structure (Portion of Debt)
30%
Optimal Capital Structure (Portion of Equity)
70%
a. If Singa Groups beta against the global portfolio is estimated to be 1.05, and the expected return from the global portfolio is 11%, compute the companys (i) cost of equity, and (ii) WACC, from the global perspective.
b. Assume that 40% of Singa Group debt is denominated in foreign currencies, at fixed average interest rate of 6%. If the foreign currencies, overall, are expected to depreciate slightly at 5%, against Singapore Dollar, and the international Fisher effect does not hold, assess how this would affect the companys WACC, and re-compute (revise) the WACC.
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