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finance data bank




Question;Essay Questions;12.1 Financial Globalization and Strategy;1) Your authors;identify three firm and market characteristics that, in part, determine;differences in a firm's cost of capital in a purely domestic market versus a;global capital market. What are these three market characteristics and how do;they help differentiate a firm's cost of capital?;12.2 The Demand for Foreign Securities: The Role;of International Portfolio Investors;1) What motivates;portfolio investors to purchase and hold foreign securities in their portfolio?;Answer: Both domestic and international portfolio;managers are asset allocators.Their objective is to maximize a portfolio?s rate;of return for a given level of risk, or to minimize risk for a given rate of;return.International portfolio managers can choose from a larger bundle of;assets than portfolio managers limited to domestic-only asset allocations. As a;result, internationally diversified portfolios often have a higher expected;rate of return, and they nearly always have a lower level of portfolio risk;since national securities markets are imperfectly correlated with one another.;12.3 The Cost of Capital for MNEs Compared to;Domestic Firms;1) What are the;components of the weighted average cost of capital (WACC) and how do they;differ for an MNE compared to a purely domestic firm?;12.4 Solving a Riddle: Is the Weighted Average;Cost of Capital for MNEs Really Higher than for Their Domestic Counterparts?;1) What do theory;and empirical evidence say about capital structure and the cost of capital for;MNEs versus their domestic counterparts?


Paper#51223 | Written in 18-Jul-2015

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