Hello, I need some help in estimating WACC of a firm which has its manufacturing base in India but has say all its sales to the US. In such a case, should one take a US WACC for the firm or India WACC. If I take the US WACC, should I need to adjust for country risk (currency risk etc). Appreciate your help on this. Many many thanks.

Question

anonymous · Answer

I'd say calculate the cost of equity using US values and adjust it for country risk in India.

anonymous · Answer

Thanks BruLee

anonymous · Answer

We always would look at the country where it is being manufactured. In today's time where the US govt. is more likely to default compared to indian goverment I would prefer to take Indian 10 year bond rates as risk free return.