If Venerus Implements the Suggested Methodology?

If Venerus implements the suggested methodology, what would be the range of tax deduction rates that AES would use around the world? * 12% discount rate was used for all projects * Venerus tangle that this model worked fairly well In 1990s this model of capital budgeting was exported to projects overseas * model became progressively strained with the expansions in Brazil and Argentina * because hedging key exposures such as regulatory or currency risk was not feasible * the ever-increasing complexity in the financing of international operations is another(prenominal) problem * when subsidiaries local currency real exchange rates depreciated, leverage at the subsidiary and safekeeping company level effectively increased, and the subsidiaries struggled to service their international currency debt * Veneruss solution to the problem had to be consistent, transparent, and accessible As a starting point, he considered the 15 representative projects shown in Exhibit 7a and, utilise t he financial data in Exhibit 7b * he endeavored to derive a weighted average appeal of capital (WACC) for each project using a standard methodology * he endeavored to derive a weighted average cost of capital (WACC) for each project using a standard methodology WACC=EVre+DVrd1-? In order to calculate each WACC, Venerus knew he would have to measure all of the constituent separate for the 15 projects * the cost of debt * the target capital structure * the local country tax rates * an allot cost of truth Venerus feared the use of a World CAPM might yield artificially low cost of capital.Similarly, Venerus did not advocate the use of a Local CAPM where beta measured the covariance of a projects returns with a portfolio of local equities. Countries such as Tanzania or Georgia, where AES had projects, did not have any meaningful equity marketplaces or local benchmarks. Still, he knew he had to find a way to capture the country-specific risks in foreign markets. 1. he calculated a cos t of debt and cost of equity for each of the 15 projects using U. S. market data 2. he added the difference between the yield on local government bonds and the yield on corresponding U. S. Treasury bonds to both the cost of debt and the cost of equity Summary of WACC Calculations for AES