The double trade and economic output leads to a better GDP/capita growth for the country. This also increases the tax revenue and hence keeps a low level of external debt necessary for financing government operation. A fall in red tape, corruption and a surge in deregulation also translate into a higher possibility for economic boom. In addition, a better external balance also reduces the possibility of default. All will upgrade the sovereign rating of Country X and decrease the sovereign spread. This should thus decrease the SSX from 5.75% to approximately 2.75% - 4%.
The relative inflation rate in Country X may increase due to the rise in production costs and in government spending, while it may be partly offset by the reduction in corruption and other illegal activities, CEX may then be increased from 0% to about -1% - 2%.
Therefore, the required return under this scenario will be in range around 14% - 18.25% for an average of 16.13%.