You work for a Canadian firm, and your boss has asked you to estimate the cost of capital for countries using the EUR. You know that S=1.243 CAD/EUR and F1=1.155 CAD/EUR. Suppose the CAD WACC for your company is known to be 6%. If these markets are internationally integrated, estimate the EUR cost of capital for a project with free cash flows that are uncorrelated with spot exchange rates. Assume the firm pays the same tax rate no matter where the cash flows are earned.
The estimated EUR cost of capital is %