Assume the Following Information for Vermont Co

Multiple Choice

Assume the following information for Vermont Co., a U.S-based MNC that needs funding for a project in Germany: U.S. risk-free rate = 4%
German risk-free rate = 5%
Risk premium on dollar-denominated debt provided by U.S. creditors = 3%
Risk premium on euro-denominated debt provided by German creditors = 4%
Beta of project = 1.2
Expected U.S. market return = 10%
US. corporate tax rate = 30% (federal and state combined )
German corporate tax rate = 40%
What is Vermont's after-tax cost of dollar-denominated debt?

A) 7.0 percent
B) 4.9 percent
C) 8.0 percent.
D) 5.6 percent