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 capital
World CAPM
Segmented/Integrated CAPM
Goldman-Integrated
Damodaran.
CHINA
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rate
Expected Market
Return
Equity Risk
Premium
Beta
Equity market
capitalization to
GDP
Volatility of
country equity
market/Volatility
of country bonds
UK
US
6.00
SOUTH
AFRICA
5.5
World
.50
.25
11.90
12.90
6.10
5.25
6.32
5.90
7.40
5.60
5.00
6.07
2.50
45%
2.15
212%
2.00
118%
2.15
125%
1.90
100%
1.50
1.70
1.20
1.20
1.20
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