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The Copper Mountain company in Boulder, Colorado (US) borrows 2,000,000 for one year at...

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Finance

  1. The Copper Mountain company in Boulder, Colorado (US) borrows 2,000,000 for one year at 5.25% interest. The current exchange rate is 0.79 per US dollar.

What is the cost ( in % terms) of this debt (from dollar perspective) if the pound depreciated 5%?

What is the cost ( in % terms) of this debt (from dollar perspective) if the pound appreciates 5%?

  1. This part of the problem is not related to part a)

The Copper Mountain company is evaluating a purchase of Neft", a small oil company in Russia, and trying to estimate Nefts cost of equity.

The Copper Mountain companys analysts collect the following information:

  • risk free rate is 5%,
  • sovereign spread (risk premium) for Russia is 7%
  • Nefts beta is 1.5
  • equity market risk premium is 6.8%

What is Nefts cost of equity?

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