WACC for exotic business

I would just calculate WACC as normal using either UST or some other European benchmark as the rf rate, then add in a country risk premium for both Turkey and Egypt.

you can make your risk assessment based on the country of incorporation (Egypt) or country of revenue (Turkey). I would do it based on the country of revenue as that is what dictates your survival as a business given your 100% exposed and depend on it, so from the Damodaran table you would use Turkey for your calcs.

as you'll be importing the foreign currency to your country and exchange it you should account everything in Egyptian currency for your analysis as you're looking at the business as a local

re. infaltion if you use real returns you should also use a real discount rate/and real risk free vs. if you use nominal you should use the nominal WACC/risk free. See Fisher equation applied to the nominal WACC to get the real WACC, which I would use it in this case.

re. your questions from above, you don't need to convert anything in US, you keep the currency that you want to see your business through 

if you have concerns about tracking Egypt vs. Turkey inflation, I would do the real return on revenue based on Turkish inflation and the costs based on Egyptian inflation, and for the real WACC would use the real rate based on Turkey inflation because again your risk is based on revenue from Turkey 

if you had 50/50% revenue then you might have ussed a blended WACC or similar

p.s. personally, I'm not a huge fan of Damodaran's approach to pricing risk and discount rates on emerging markets because it is just mathematically elegant but practically useless/far from reality. You can see him demanding a 25% minimum Ke to justify holding equity/share in a business, but plenty of local businesses run at 15-20% which is extremely good on local terms. His analysis is based on the US perspective on the risk of that country based on default spreads (which on their own are based on transparency/asymmetry of information/illiquidity/etc.), meanwhile locals' risk perception is way lower hence you get extremely depressed valuations despite having viable local businesses (this without delving also on the type of business/long-term customers locked with contracts/etc. etc. which are completly ignored if you just take at face value his numbers and slap them to your biz). Besides, I do not want to get into very academcic/philosophical discussions, but in poorly functioning capital markets the cost of funding/and opportunity cost of capital based on traditional finance theory is extremely flawed to the point that it's useless as what the discount rate is basically answering what is what is the minimum return below which you shouldn't invest and consume  instead, which would be retarded to think that a local would decide to consume if his business delivers 18% Ke instead of 25% when his alternative is a wage and get paid x5 times less lol. So because of this I would do the assessment more on qualitative grounds (including a subjective discount rate based on how likely is the business to grow/continue being relevant/expansion in my view) rather than what you're trying to do aka false precision.

p.s.s. off-topic but Egypt has a 12% inflatin and Turkey 32.3%% so hope your prices in Turkey track the inflation otherwise this is an awful investment 

Noooo!!!!! We’re supposed to be talking about Charlie Kirk!!!!! Not actual finance questions !!!!!

Idk why my reply got removed. Maybe the link I provided? Anyways. To answer again (without links), yes, US risk-free rate and US ERP. For country risk premium, you technically should weight the CRPs based on the mix of your cash flows between Egypt and Turkey. Convert cash flows to USD using forward exchange rate curve.

My understanding of why it may not be a good idea to use local currency cash flows and local risk-free rates is that the “risk-free” rate often isn’t truly risk free in emerging markets. 10%+ treasury rates aren’t exactly risk-free. There’s inflation and other geopolitical risks baked into that. So adding a CRP on top is double-counting the risk. 

What I’ve seen sell-side equity research do for emerging market companies (where target price needs to be in local currency), they still use US risk-free rates and ERPs for the reason I articulated. They then add country risk premium and another mid-single-digit percentage for “inflation differential”. Issue is they don’t specify how they calculate the CRP nor inflation differential factor, so we chose Damodaran’s method instead rather than spin wheels trying to figure out those brokers’ methodologies.

Cash flows then converted to USD using forward Fx curve.

Do keep in mind though that I’m not a cross-border expert so take this with a grain of salt. This was a one-time situation where my US client (buyside M&A advisory) was evaluating a target in an emerging market country, so we thought it was reasonable to think of it from the perspective of a US investor. There may be other considerations if you are analyzing this from the perspective of an investor / acquirer in the emerging market (as the other commenter explained). 

Thank you both, great insight! (not sure why response was removed, probably due to some links) 

It seems there are two approaches for the cost of equity so far, let me try to summarise 

1) Ke =  Turkey risk free + beta* Turkey ERP, no CRP
- Revenue received in nominal EGP and will adjust for Turkish inflation in the forecast (i.e. nominal)
- Cost received in nominal EGP and adjusted for Egypt inflation in the forecast(i.e. nominal) 

Assumptions: 
- Risks from country of revenue

Questions:
- Based on the approach above, believe the cost of equity is nominal (risk free would be local egypt gov bond which should have taken account into inflation, and the Turkey ERP from Damodaran should be on nominal basis if not mistaken), so no need to convert? - guess my true question is how do I know whether my WACC is nominal or real (sorry for stupid question)? 
- Lets say Egypt has war and could disrupt production, how will these risks be reflected in the cost of equity?


2) Ke = US risk free + beta* US ERP + CRP, where CRP would be CDS (US - EM) * equity-bond correlation multipler 

Assumptions:
- Looking from US investor perspective 

Questions:
- Given rev in TRY and cost in EGP, how would you do the mix of cash for CRP purposes?
- is there any sources for the equity-bond multiplier?
- How would you  the cash flow be adjusted if in USD? - guess you would do same thing for rev and cost as mentioned above, and then covert everything in USD?
- if the investor was from West Europe, how would you change your approach?